Incident: Baosteel Packaging published its 2022 annual report and the first quarter report of 2023. In 2022, the company achieved revenue of 8.543 billion yuan, an increase of 22.35% over the previous year; the net profit of the mother was 268 million yuan, an increase of 0.78% over the previous year; and the net profit of the mother after deduction was 253 million yuan, a decrease of 3.00% over the previous year. Among them, in the 22Q4 quarter, the company achieved operating income of 2,328 million yuan, an increase of 14.82% over the previous year; the net profit of the mother was 57 million yuan, a decrease of 7.87% over the previous year; and the net profit of the mother after deduction was 52 million yuan, a decrease of 21.64 percent over the previous year.
2023Q1 achieved operating income of 1,759 million yuan, a year-on-year decrease of 5.04%; Guimu's net profit was 61 million yuan, down 4.40% from the previous year; after deduction, Fumo's net profit was 58 million yuan, a year-on-year decrease of 6.37%.
The growth rate of two-piece cans was impressive in '22, and domestic demand can be expected to gradually pick up by region. In '22, the company achieved overseas/domestic revenue of 6773/1,743 billion yuan respectively, up 18.44%/40.10% respectively over the previous year. In '22, the company accelerated its layout in the Southeast Asian market, and production capacity of 80,000 tons was put into operation in Malaysia. As controls in Vietnam and other places have been completely liberalized, the company's new customers have been successfully developed, overseas revenue has grown rapidly, and its share has further increased. By product, in '22, the company achieved revenue of 77.10/806/028 million yuan respectively, with year-on-year increases of 29.99%/-21.86%/34.03%, respectively, accounting for 90.25%/9.43%/0.32% respectively. 1) In terms of two-piece cans, benefiting from the release of higher-priced overseas production capacity, the company achieved a sharp rise in volume and price of the company's two-piece cans in '22. Sales increased 8.19% year on year to 14.402 billion cans, and the average price increased 20.05% year on year to 0.54 yuan/can. 2) In terms of packaging color printing iron, the company's packaging color printing iron production fell 19.30% year on year in '22, and sales fell 19.93% year on year, mainly dragged down by short-term pressure on downstream demand for three-piece cans. In 23Q1, the company achieved revenue of 1,759 million yuan, a year-on-year decrease of 5.04%. Our analysis was mainly due to the low increase in domestic demand for two cans during the off-season. With the optimization of epidemic prevention policies and a gradual recovery in terminal consumption, sales are expected to improve during the peak season, and there is room for recovery.
The expansion of production capacity at home and abroad progressed smoothly, and the market share of the Southeast Asian market increased further 1) On the overseas side, the company's Malaysian production capacity (design capacity 800 million cans/year) reached the trial operation stage of commissioning in June '22, and Cambodia's production capacity (design capacity of 1.2 billion cans/year) officially started construction at the end of April '22. 2) On the domestic side, Anhui's production capacity (design capacity of 1.1 billion tanks/year) was put into operation on 22H1, and production capacity is expected to be gradually released in 22Q3; production capacity in Lanzhou (design capacity of 1 billion tanks/year) was put into operation at the end of 21, and production capacity continued to rise in '22. Furthermore, the company continues to promote technological reform and capacity expansion projects, upgrade older production lines, and improve production efficiency.
In terms of falling raw material prices and product structure optimization, the 23Q2 profit level is expected to continue to improve profitability. In 2022, the company's gross margin was 8.02%, down 1.48pct from the previous year. Among them, 22Q4 gross margin was 7.40%, an increase of 1.36pct over the previous year. The company's gross margin in 23Q1 was 8.81%, an increase of 0.59pct over the previous year. The increase in the company's profit level in 23Q1 was mainly due to the early decline in raw material prices. Raw material prices continued to run low in 23Q1, and the share of overseas markets with high gross margins increased, and profits in 23Q2 can be expected to continue to improve. According to Wind data, the average price of aluminum in 23Q1 was 18,500 yuan/ton, down 1.62% month-on-month and 16.82% year-on-year.
In terms of period expenses, the company's expenses rate in 2022 was 3.59%, down 1.16 pct from the previous year; the sales/management/R&D/finance expenses ratio was 0.85%/2.31%/0.17%/0.25%, respectively, up 0.04/-0.57/-0.56/-0.08pct, respectively. The company's expense rate for the 23Q1 period increased by 0.95pct to 4.43% year-on-year. Under the combined influence, the company's net interest rate in 2022 was 3.28%, down 0.88pct from the previous year; among them, 22Q4 net interest rate was 2.52%, down 0.86pct from the previous year.
The company's net interest rate in 23Q1 was 3.67%, an increase of 0.08pct over the previous year.
Investment advice: As a leading metal packaging enterprise, the company continues to optimize its product structure and production capacity layout. Along with the optimization of the industry pattern, profits are expected to improve. Early equity incentives show confidence in development, and performance is expected to continue to grow. We expect Baosteel Packaging's revenue for 2023-2025 to be 99.95, 110.03, 12.375 billion yuan, an increase of 16.99%, 10.09%, 12.47% over the previous year; net profit of the parent company is 306, 3.67, and 438 million yuan, up 13.99%, 19.93%, 19.35% over the previous year, giving 26xPE in 2023, with a target price of 7.11 yuan. Corresponding PE is 24.7x, 20.6x, 17.3x, maintaining the investment rating of increasing holdings -A.
Risk warning: downstream demand falls short of expectations; risk of fluctuations in raw material prices; risk of repeated epidemics; risk reduction of orders from major customers.