3Q23 performance is in line with our expectations
The company announced its performance in the third quarter of 2023:1- 3Q23 realized revenue of RMB 7.334 billion yuan, with a year-on-year growth of 1.13%, net profit attributable to parent company of RMB 451 million yuan, with a year-on-year growth of 4.25%, and net profit deducted from non-parent company of RMB 436 million yuan, with a year-on-year growth of 17%. The results met our expectations.
By quarter, the company's 1Q/2Q/3Q23 realized revenue of 22.42/25.03/25.88 billion yuan respectively, with year-on-year revenue of-4.72%/+10.26%/-1.53% respectively, and net profit attributable to parent company of 1.19/1.86/1.46 million yuan, with year-on-year revenue of-2.26%/+67.28%/-26.87% respectively.
Trend of development
3Q23 Revenue performance is under pressure. Company 1- 3Q23 revenue increased 1.13% year-on-year, of which 3Q23 revenue decreased 1.53% year-on-year. The revenue decline of 3Q23 was mainly affected by the decline of film products and trade business, PA/PE film, fast moving consumer goods trade and import and export trade business 3Q23 revenue decreased by 13%/28%/62% year-on-year respectively. However, businesses such as color paper packaging printing and OEM beverages achieved steady growth, with 3Q23 revenue increasing by 12%/14% year-on-year respectively.
Raw material prices fell and profitability improved. The gross profit margin of the company 1- 3Q23 was 21.85%,+1.17ppt year-on-year, which we believe was mainly due to the fall in raw material prices. From the expense side, the expense ratio of the company during 1- 3Q23 period was 13.19%,+0.30ppt year-on-year, among which the sales/management + R & D/finance expense ratio was 1.93%/10.40%/0.86% respectively,-0.30ppt/+0.75ppt/-0.15ppt year-on-year. Under the comprehensive influence, the net interest rate of 1- 3Q23 is 6.15%,+0.18ppt year-on-year.
Pay attention to the changes in demand of aluminum plastic film industry and the expansion of customers. In recent years, benefiting from the rapid development of lithium battery industry, the improvement of soft pack battery permeability, the rapid growth of aluminum plastic film demand, and with the technological progress of domestic enterprises, the rapid increase in the share of domestic aluminum plastic film, Zijiang New Material, a subsidiary of Zijiang Enterprise, has developed into a leading aluminum plastic film manufacturer in China, and has established good cooperation with BYD, ATL and other lithium battery head enterprises. 1- 3Q23 Company's aluminum-plastic film revenue increased by 17.2% year-on-year to 551 million yuan, and the growth slowed down in the third quarter. We believe that it is related to the phased changes in industry demand and the pace of customer development of the Company. It is suggested to pay close attention to the demand changes of aluminum plastic film industry and the expansion of new customers of the company.
Profit forecast and valuation
Considering the weak downstream beverage consumption demand and the adjustment of product unit price caused by the decline of raw material price, we respectively reduce the revenue of 2023/2024 by 5%/6% to 99.15/108.27 billion yuan, and reduce the net profit of parent company by 11%/13% to 6.14/676 million yuan respectively. The current stock price corresponds to 12/11 times P/E ratio in 2023/2024 respectively. Maintain outperform industry rating, adjust based on earnings forecast, lower target price by 7% to 6.50 yuan, corresponding to 16/15 times P/E ratio in 2023/2024 respectively, with 33% upside compared with current share price.
Risk
Industry competition intensifies; raw material prices fluctuate sharply; new business expansion falls short of expectations.