We maintained “collection” and lowered our target price to HK$21.10. Due to China's relatively slow economic recovery in the first half of 2023, domestic downstream demand remains weak. We lowered Haitian International (the “Company”)'s shareholder net profit forecast for 2023-2025 to RMB 2,470 billion (-3.4%) /RMB 2,768 billion (-2.2%) /RMB 2,990 million (-3.3%), respectively. We forecast the company's earnings per share for 2023/2024/2025 to be RMB 1.547, RMB 1.734, and RMB 1.873, respectively. Our target price corresponds to 12.0 times/10.7 times/9.9 times the 2023-2025 price-earnings ratio and 1.6 times the 2023 price-earnings ratio.
The company's performance for the first half of 2023 is in line with our expectations. The company's revenue for the first half of 2023 was RMB 6.4 billion, down 2.0% year on year, slightly lower than our expectations. However, with the increase in the company's gross margin and the increase in financial revenue, the company's net profit has achieved a relatively good increase. The company achieved net profit of RMB 1.2 billion in the first half of 2023, an increase of 5.0% over the previous year.
The company's gross margin has increased. The company's gross margin for the first half of 2023 rose 1.3 percentage points year over year to 32.0%. We think the company may be able to maintain its gross profit margin in the second half of 2023. Prices of raw materials are likely to remain at current levels. The RMB exchange rate may help raise gross profit margins in overseas markets. Furthermore, as domestic demand continues to recover, the company's capacity utilization rate is likely to increase, which will further increase gross profit margin.
Overseas market demand remains strong, and the company continues to expand overseas markets. Overseas market demand remains strong.
The company has a balanced layout in the global market. Despite the sharp decline in the Southeast Asian market, the company's growth in Europe and North America continued to drive overall overseas revenue growth. As the company's product competitiveness and services continue to improve, we believe its share in overseas markets may continue to increase. The company's overseas revenue is expected to maintain steady growth for a long time.
Catalysts: Downstream demand recovers; raw material prices fall; company capacity utilization increases.
Risk factors: Downstream recovery falls short of expectations; the company's overseas market expansion progress falls short of expectations.