Key points of investment:
The company released its 2023 annual report, and the performance was in line with expectations: in 2023, it achieved revenue of 1,775 million yuan, an increase of 41.0% year on year; realized net profit of 472 million yuan, up 73.6% year on year; after deducting non-net profit of 466 million yuan, up 71.8% year on year; of these, Q4 revenue was 547 million yuan, up 29.2% year on year, and net profit from mother was 158 million yuan, up 51.6% year on year.
The dividend ratio was increased in 2023. It is proposed to distribute a cash dividend of 20 yuan (tax included) to all shareholders for every 10 shares, for a total cash dividend of 208 million yuan, accounting for 44.1% of the 2023 return profit (38.3% dividend ratio); based on the current stock price of 70.10 yuan/share, the corresponding dividend rate is 2.9%.
Since 23Q4, the US thermos mug industry has been booming, and orders from major downstream customers have continued to increase. In 2023, the company's largest customer PMI (Stanley+ Starbucks) had revenue of 1,508 billion yuan, +75.2% year-on-year, and continued to increase. Since 23Q4, the US thermos mug industry has maintained a high level of prosperity. According to data from the General Administration of Customs, the total export volume of China to the US in 23Q4 was 416 million US dollars, an increase of 27.9% over the previous year. Orders from Stanley, the company's largest downstream customer, have maintained a high increase, mainly benefiting from the continuous upgrading of its marketing style, seizing traffic dividends from emerging social platforms such as Tiktok in the US, and successfully creating popular Quencher products through influencer KOL delivery, etc.; at the same time, the rapid iteration of new products maintains sales popularity and achieves rapid growth through limited sales and other methods. According to Amazon's US TOP100 product sales data, Stanley brand sales increased 144.4% year on year in 2023, and sales increased 114.7% year on year in January-January '24. Jiayi Co., Ltd. gave full play to its advantages in production and supply chain efficiency, focused on overseas OEM business, deeply tied up high-quality major customers, and established long-term stable cooperative relationships. Orders for the Stanley explosion series continued to increase, and other customers such as Starbucks and Lululemon also achieved high growth performance, driving the company's revenue performance to a high increase.
The product structure continues to be optimized to drive continuous improvement in product unit price and profitability. According to the company's announcement data, the company's sales volume of metal products in 2023 was 38.1295 million units, up 17.6% year on year; according to estimates, the unit price of the product was 45.25 yuan/piece, up 19.3% year on year. The company's largest customer continues to launch new products such as limited-edition models and co-branded models with complex surface treatment processes. The company cooperates with major downstream customers to achieve flexible supply in small batches. The gross margin of the new products is higher than that of conventional models and old models, which drives the company's product structure optimization and profitability improvement. In 2023, the company's comprehensive gross profit margin was 40.7%, +6.5 pct year on year; 23Q4 gross profit margin was 43.8%, +5.5 pct year on year, +3.7 pct month on month. Considering that Stanley, a major downstream customer, continues marketing styles such as limited models and co-branded models, Jiayi's profitability is expected to continue to be maintained in 2024.
Mainly on the cost side, foreign exchange hedging tools dragged down profits in 2023 slightly. According to the company announcement, the company's sales/management/ R&D/ finance expenses ratio in 2023 was 1.6%/4.4%/3.8%/-0.7%, respectively, -0.1/-0.1/+0.3/+1.3 pct, respectively. The sales and management R&D expense ratio is relatively stable, and the financial expense ratio is mainly affected by exchange rate fluctuations. Due to the company's foreign exchange hedging, the company's exchange revenue in 2023 was 2.687 million yuan, and the forward settlement loss was 147.943 million yuan, dragging down the company's profit of 12.1136 million yuan; in 2022, the company's exchange income was 22.99 million yuan, and the forward foreign exchange loss was 15.9848 million yuan, which positively boosted the company's profit by 6.1059 million yuan. According to the company announcement, 23Q4's sales/management/ R&D/finance expenses ratio was 1.0%/5.7%/4.2%/1.1%, respectively, -0.8/+1.2/+0.5/+1.4pct year-on-year, respectively. Due to the distribution of 23Q4 bonuses, the management fee rate increased slightly due to the increase in employee benefit levels in 2023 and the impact of the implementation of equity incentives.
Major downstream customer Stanley is iterating on new products and expanding in new regions, and growth continuity is strong. In 2024, Stanley's hit series Quencher is expected to further launch new products such as co-star models and custom lettering models to maintain sales popularity, while increasing the promotion of new series such as IceFlow. Sales are continuing to be popular in the US market. At the same time, Stanley is still dominated by the US market, and countries such as South America, Europe, Southeast Asia, and South Korea still have plenty of room to expand in the later stages, driving endogenous growth in the medium to long term.
Jiayi Co., Ltd. focuses on strategic positioning, leading surface treatment technology, and outstanding supply chain advantages. It has achieved deep binding with high-quality major customers, and the supply share is expected to continue to increase. The company's business focuses on overseas thermos cup foundry to achieve timely response to customer orders and rapid proofing of new products. Continued investment in research and development, with leading surface treatment technology, enables rapid iteration of product appearance. New products are generally exclusive; they fully meet the diversified requirements of Stanley products and meet the more complex surface treatment production requirements of co-branded models. Domestic factories have gradually achieved intelligent and automated transformation, with high supply chain efficiency and lean management, driving up profitability and ROE. The company laid out a base in Vietnam ahead of schedule and is expected to be put into operation in 2024. It fully meets the requirements of downstream customers to diversify the supply chain, enhances customer stickiness, and is expected to gradually increase its supply share, and is expected to use this layout to further develop other major customers.
With the trendy development of thermos cups in the US, a global trend has begun to emerge. Stanley's management and marketing are refreshed, and new series and regional expansion have plenty of room for growth; Jiayi Co., Ltd. has outstanding surface treatment technology and supply chain advantages, and a forward-looking overseas base layout, steadily increasing the supply share of major customers and paving room for other high-quality major customers to expand. We maintained the company's 2024-2025 net profit of 583/734 million yuan, and added a 2026 profit forecast of 904 million yuan, +23.4%/+25.9%/+23.2%, respectively. The corresponding PE was 13X/10X/8X, maintaining the “buy” rating!
Risk warning: risk of large fluctuations in raw material prices, risk of exchange rate fluctuations, risk of environmental changes at home and abroad, risk of major customer sales falling short of expectations.