The company released the 2023 performance forecast: net profit due to mother is expected to achieve net profit of 0.95 to 143 million yuan (YoY +104.2% ~ 106.3%), with a median net profit loss of 119 million yuan (YoY +105.3%), net profit loss of 2.5-350 million yuan (YoY +85.5% ~ 89.6%); 2023Q4 is expected to achieve net profit attributable to mother of RMB 211-259 million (YoY +109.1% ~ 111.2%, month-on-month +36.7% to 67.4%), with a median value of $235 million Yuan (+110.2% YoY, +52.0% month-on-month), realized net profit of 0.09-109 million yuan (+100.4% ~ 104.6% YoY, -88.9% ~ 40.2% month-on-month), with a median value of 59 million yuan (+102.5% YoY, -24.4% month-on-month).
Industry demand recovered weakly, and profits improved month-on-month. In terms of papermaking, the market price of 2023Q4 boxboard/corrugated paper was -14.18%/-11.87%, respectively, +2.54%/+5.91% month-on-month, demand recovered weakly during the peak season, product prices increased month-on-month, cost-side 2023Q4 domestic waste prices were -19.83%/+3.22% year over month, respectively, and coal prices remained relatively low. The company continues to strengthen lean management, reduce costs and increase efficiency, gradually optimizes inventory, and steadily increases profitability. In terms of packaging, the company's major packaging customers are deepening, and the revenue share of high-value customers has increased, and the expansion and share growth of high-quality customers is expected to drive the increase in packaging profitability.
The pace of capacity expansion is slowing down, and cost advantages are being strengthened. In January 2024, the first phase of the 300,000-ton corrugated paper project in Jilin Shanying was put into operation. We expect the overall pace of expansion of the company's paper production capacity to slow down in 2024, deepening the layout of the industrial chain and improving lean production capacity as the main driving force for the company's subsequent growth. Furthermore, at present, the company's domestic waste recycling system is gradually being improved. At the same time, it recycles fiber in the US, the Netherlands, etc., and has 1.1 million tons of recycled slurry in Southeast Asia. It is expected that the cost advantage will increase.
Profit forecast and investment rating: We expect the company's medium- to long-term industrial chain integration to build core competitiveness. We expect net profit to be 1.2/10.9/1.55 billion yuan in 2023-2025, respectively, with a corresponding PE of 64X/7X/5X, maintaining a “buy” rating.
Risk warning: Downstream demand recovery falls short of expectations, packaging customer expansion falls short of expectations, and industry competition intensifies.