Event: The company released its 2023 three-quarter report. In the first three quarters of 2023, the company achieved revenue of 1,941 billion yuan, an increase of 38.56%, net profit of 174 million yuan, an increase of 31.74%, deducted non-net profit of 156 million yuan, an increase of 33.31%, and an EPS of 0.59 yuan. 23Q3 achieved revenue of 744 million yuan, an increase of 12.82%, net profit of 81 million yuan, an increase of 0.47%, non-net profit of 74 million yuan, an increase of -4.39%, and a continuous increase of -4.39%. The 23Q3 company's net interest rate was 13.31%, an increase of 3.24PCT over the previous month. The scale effect drove profit growth.
Comment:
On the revenue side, the company's revenue from leather for shoes, bags, and straps grew slowly in the first three quarters of 2023, mainly due to weak terminal consumption. In terms of automotive interior leather, automobile sales have entered the peak season. Driven by the rapid increase in sales of new energy vehicles, Hongxing Leather's revenue grew rapidly in the first three quarters of 2023. In terms of Baotai leather, along with production capacity investment and increased production efficiency, Baotai Leather contributed significantly to revenue in the first three quarters of 2023.
On the profit side, 1) The company's overall gross margin for the first three quarters of 2023 was 21.58%, an increase of 1.88PCT. Among them, the gross margins of automotive leather interiors and Baotai leather continued to rise. 2) In the first three quarters of 2023, the company's sales, management, R&D, and finance increased by 0.01PCT, -0.38PCT, -0.13PCT, and 0.37PCT to 1.08%, 3.40%, 2.37%, and 0.52%. The revenue scale expanded rapidly, and the expense ratio remained stable throughout the period. 3) The net cash flow from the company's operating activities in the first three quarters of 2023 was 5,5599 million yuan, a decrease of 88.50%, mainly due to an increase in employee remuneration payments.
The advantages of the main business and automotive leather business collaborated to continuously increase market share. In terms of traditional main business, terminal demand slowed in the first three quarters of 2023. The company has many years of experience in R&D and production of leather for shoes and bags, and continues to expand overseas markets, which is expected to drive rapid growth in the main business. In terms of automotive leather, the company has production and processing capabilities throughout the industry chain. On the one hand, the company continues to deepen cooperation with old customers, and product volume drives order growth. On the other hand, based on years of high-quality customer cooperation and endorsement, the company continues to cooperate with new customers from OEMs, which is expected to continue to increase its market share of automotive interior leather.
Profit forecast and investment advice: We adjusted the company's net profit forecast for 2023-2025 to 232/2.94/354 million yuan (original value was 232/2.93/363 million yuan). The current stock price corresponds to 15.10 times PE in '23. We are optimistic about the company's new energy vehicle order volume. The collagen business has a lot of room for growth and maintains a “buy” rating.
Risk factors: Large fluctuations in raw material prices and rising labor costs.