Incident: The company released its 22-year annual report and 23-quarter report. It achieved revenue of 2,802 billion yuan in 2022, an increase of 13.82% over the previous year, and achieved net profit of 423 million yuan to the mother, an increase of 16.6% over the previous year. Q4 alone achieved revenue of 817 million yuan, an increase of 0.19% over the previous year, and net profit of the mother was 161 million yuan, an increase of 19.1% over the previous year. The company achieved revenue of 632 million yuan in Q1 2023, an increase of 22.79% over the previous year, and achieved net profit of 79 million yuan to the mother, an increase of 44.65% over the previous year.
Comment:
Q1 revenue continued to grow rapidly, and new production capacity is expected to be released steadily in '23. The company achieved revenue of 2,802 billion yuan in 2022, an increase of 13.82% over the previous year, achieved revenue of 817 million yuan in Q4 alone, an increase of 0.19% over the previous year, and achieved revenue of 632 million yuan in Q1 2023, an increase of 22.79% over the previous year.
By product, the company's baby hygiene products achieved revenue of 2,032 billion yuan in '22, an increase of 15.52% over the previous year, mainly driven by customer demand; adult hygiene products mainly included adult incontinence products, menstrual pants, and sanitary napkins, which achieved revenue of 621 million yuan in '22, an increase of 6.15% over the previous year; other products achieved revenue of 87 million yuan, an increase of 44.49% over the previous year, mainly due to increased revenue from composite core and wet wipes products produced by the company. In terms of production capacity, the company has now built production bases in Hangzhou, Jiangsu, Thailand, Hubei, etc. Among them, the capital raising project of 1.2 billion absorbent hygiene products was 75.54% by the end of '22; the construction of the plant in Thailand has been completed and put into operation one after another; the company's own brand, Sunnybaby, has entered major supermarkets in Thailand and carried out simultaneous marketing activities; the Hubei plant project progress by '22 was 62.79%, mainly producing baby diapers, women's menstrual pants, adult diapers and other products. By the end of '22, the construction of the Hubei plant was completed, and the company will integrate existing production lines and adjust production capacity. In terms of R&D, the company continues to invest in research and development of new products, and has successfully developed products such as easy-to-wear and detachable menstrual pants with completely innovative structures, easy to put on and take off baby pull-on pants, and new ultra-breathable materials.
Gross margin is improving as scheduled, and it is expected that cost pressure will ease and profits will be released. In terms of gross margin, the company achieved a gross profit margin of 23.15% in '22, -3.17pct year on year; 22Q4 gross margin was 24.75%, +5.47pct year on year; 23Q1 gross margin was 23.05%, +0.89pct year on year. In 2022, due to rising international crude oil prices, the prices of raw materials such as downstream products SAP and spandex wire rose, and the company's gross margin declined year-on-year; as oil prices fell in the second half of '22, the company's gross margin continued to improve. As raw material prices returned to normal levels, the company's profit elasticity is expected to gradually be released. In terms of period expenses, the company's sales, management, R&D, and financial expenses rates in '22 were 3.5%, 2.1%, 3.6%, and -1.5% respectively. The year-on-year changes were -0.2pct, +0.1pct, -0.1pct, -0.1pct, and -0.5pct respectively, and the overall cost ratio continued to be optimized. In terms of net profit, the company achieved net profit of 423 million yuan to the mother in 22, up 16.6% year on year, net interest rate was 15.1%, +0.36pct year on year; net profit of 161 million yuan in Q4 alone, up 19.1% year on year, net interest rate was 19.64%, +3.1pct year on year; net profit of 23Q1 was 79 million yuan, up 44.65% year on year, net interest rate 12.56% year on year, +1.9 pct year on year.
In terms of cash flow, the company's cash flow from operating activities in '22 was 592 million yuan, -1.8% year on year, mainly due to increased purchase payments; cash flow from investment activities was 269 million yuan, +225% year on year, mainly due to the recovery of investment and financial management; cash flow from fund-raising activities - 355 million yuan, -80% over the same period last year, mainly due to cash dividends and company repurchases.
Profit forecast and investment rating: As a leading domestic direct manufacturer and sales enterprise of absorbent hygiene products, the company leads in product development and innovation, continues to increase its customer share in stock and develop new customers to create growth potential. Overseas independent brand products are also expected to contribute incrementally. We expect the company's net profit to its mother in 2023-2025 to be 526 million yuan, 630 million yuan, and 747 million yuan respectively, up 24.5%, 19.6%, and 18.7%, respectively. The current stock price corresponds to the 23-year PE of 13x, maintaining the “increase in holdings” rating.
Risk factors: Market competition intensifies the risk and the risk of a sharp rise in raw material prices.