2023 results fell slightly short of our expectations
The company announced 2023 results: revenue of 9.116 billion yuan, -5.1% year on year; net profit to mother of 560 million yuan, -7.2% year on year. Downstream demand is weak, industry competition is intensifying, and performance is slightly lower than our expectations.
On a quarterly basis, 1-4Q23 achieved revenue of 22.42/25.03/25.88/1,782 billion yuan, respectively, -4.7%/+10.3%/-1.5%/-24.4%, respectively; net profit to mother of 1.19/1.86/1.46/ 109 million yuan, respectively, of -2.3%/+67.3%/-26.9%/-36.4%, respectively.
Development trends
Demand in the industry is weak, and revenue growth is under pressure. The company's revenue in 2023 fell 5.1% year on year. By product, revenue from PET bottles and preforms fell 3.7% year on year to 1,648 billion yuan, mainly affected by falling product prices due to falling raw material prices, but sales still achieved steady growth; revenue from the colored paper packaging printing business increased 8.6% year on year to 1,948 billion yuan, and sales increased 8.0% year on year to 1,025 million prints, successfully entering the paper cup business of coffee brands such as Costa; OEM beverage business revenue increased 11.6% year on year to 882 million yuan; aluminum-plastic film business revenue increased 11.6% year on year to 882 million yuan; aluminum-plastic film business revenue The year-on-year increase was 1.7% to 707 million yuan, and sales volume increased 22.7% year-on-year to 51.66 million square meters. Industry demand slowed and industry competition intensified; revenue from the plastic anti-theft cover business increased 70.7% year on year to 559 million yuan.
Gross profit margins have increased. The company's gross margin increased by 0.8ppt to 21.4% year on year in 2023. We think it was mainly affected by changes in the business structure; among them, PET bottles and bottle preforms, crown caps and labels, colored paper packaging printing, and aluminum-plastic film business gross margins were -0.6/+3.2/-1.4/+5.1ppt, respectively. We think it was mainly affected by changes in business structure and increased competition in the industry. In terms of expenses, the company's expense ratio for the 2023 period was +0.6ppt, with sales, management, finance, and R&D expenses rates of -0.2/+0.7/-0.1/+0.2ppt to 2.0%/6.9%/0.9%/3.5%, respectively. Affected by the increase in the expense ratio, the company's net profit margin in 2023 was -0.1ppt to 6.1% year-on-year.
Pay attention to industry needs and the company's customer development. Demand in the downstream beverage and aluminum-plastic film industry was relatively weak in 2023, and the recovery fell short of expectations. At the same time, competition in the industry intensified, putting pressure on the company's revenue and profit. The company continues to develop new customers and deepen customer cooperation. The container and packaging division has achieved good breakthroughs in non-beverage customers such as condiments, dairy products and daily chemicals, and deepened cooperation with P&G and Kimberley during the new expansion; the paper packaging division expanded around tea and coffee customers such as Michelle Ice City and Costa, while also developing paper bags and lunch boxes. It is recommended to actively pay attention to the company's new customer development.
Profit forecasting and valuation
The recovery in industry demand fell short of expectations, and the company's 2024 revenue and net profit forecasts were lowered by 8%/5% to 99.21/640 billion yuan respectively; when the 2025 profit forecast was first introduced, we expect the company's 2025 revenue and net profit to mother to be 10.728/718 billion yuan respectively; the current stock price corresponds to 12/11 times the price-earnings ratio for 2024/2025, respectively. Maintaining an industry rating and a target price of 6.50 yuan, corresponding to the price-earnings ratio of 15/14 times in 2024/2025, respectively, there is 25% room for upward movement compared to the current stock price.
risks
Raw material prices fluctuated greatly; industry competition intensified; industry demand fell short of expectations.