Revenue is growing steadily, and the cost rate level remains stable
In the first three quarters of 2023, the company achieved operating income of 691 million yuan, an increase of 21.45% year on year; net profit to mother was 54 million yuan, down 38.07% year on year; operating cash flow was 41 million yuan, up 2142.67% year on year, mainly due to a significant increase in the company's sales revenue and increased repayments. In the first half of the year, the company's medicinal glass business grew rapidly, achieving revenue of 211 million yuan, an increase of 36.90% over the previous year. Among them, borosilicate medicinal glass bottles contributed 172 million yuan in revenue, a year-on-year growth rate of 38.22%. On the cost side, the company's sales expense ratio, management expense ratio, financial expense ratio, and R&D expense ratio for the first three quarters were 4.05%/2.90%/-0.21%/3.21%, respectively, and the overall cost ratio remained stable.
The layout of borosilicate medicinal glass is becoming more and more perfect, and the expansion of production capacity opens up room for long-term growth
In order to meet growing market demand, the company is actively promoting the expansion of the production capacity of borosilicate glass. In terms of molded bottles, the company's convertible bond issuance was successfully implemented in September 2023, raising 500 million yuan for the construction of a lightweight pharmaceutical molded glass bottle (Class I) industrialization project. After delivery, the project will have an annual production capacity of about 47,000 tons of molded bottles. Considering the lightweight thin-walled high-grade pharmaceutical glass bottle project (production capacity of about 50,000 tons) and the M2 lightweight pharmaceutical molded glass bottle project (production capacity about 11,000 tons), the company's third phase project will achieve a total production capacity of 630,000 tons of borosilicate molded bottles, and economies of scale are expected to be released faster. The company's pharmaceutical glass business has significant customer advantages. It has high-quality customer resources such as Yuekang Pharmaceutical, China Resources Shuanghe, New Era Pharmaceutical, and Qilu Pharmaceutical. As the company's borosilicate pharmaceutical production capacity is gradually realized, it is expected to contribute greatly to performance flexibility.
The daily-use glass category continues to be upgraded, and profitability is expected to continue to increase the variety of the company's daily-use glass business. The products have been recognized by many large domestic and foreign customers. Key customers include well-known foreign companies such as OXO in the US, LOCK & LOCK in Korea, and well-known domestic customers such as Midea and Galanz. In March of this year, the company's high-borosilicate glass production project for LED optical lenses and production projects for higher-margin products such as lightweight borosilicate glass utensils were successfully put into operation. We believe that as product transformation accelerates, the profitability of the company's daily-use glass business is expected to continue to increase.
Profit forecasting
The company's revenue for 2023-2025 is 961, 12.01, and 1,451 billion yuan, respectively, EPS is 0.35, 0.49, and 0.65 yuan, respectively. The current stock price corresponds to PE 49.5, 35.7, and 27.1 times, respectively. The accelerated integrated layout of the company's borosilicate pharmaceutical glass industry chain will continue to benefit from consistent evaluation and implementation of related approval system policies to achieve an accelerated increase in penetration rate. Subsequent performance growth is highly flexible, and the “buy” investment rating will be maintained.
Risk warning
Production capacity implementation falls short of expectations, new product release falls short of expectations, risk of rising raw material prices, industry policy and government supervision risks, etc.