Core views
The company achieved revenue of 1,775 million yuan/ +41.0% in 2023, achieving net profit of 472 million yuan/ +73.6%; 23Q4 achieved revenue of 547 million yuan/ +29.2%, achieving net profit of 158 million yuan/ +51.6%. Looking at volume and price splitting, the company achieved sales volume of 38.1295 million units/ +17.6% in 2023, an average unit price of RMB 46.56 yuan/ +19.8%, the average unit price of US dollars was 6.64 USD/ +15.0%, and volume and price rose sharply in 2023. In terms of customers, the company's largest customer PMI (operating brands including Stanley, Starbucks, etc.) contributed 1,508 billion yuan/ +75.2% in revenue in 23 years, accounting for 84.91% /+16.61 pct of revenue. In January-January '24, the major customer Stanley thermos mugs sold +54.3% year-on-year on Amazon. In March, the sales share further increased to 47.6%, ranking first. Looking forward to the future, the marketing of major customer brands will continue to expand, and there is plenty of room for future sales expansion, which is expected to drive the company's business to maintain rapid growth.
occurrences
The company released its 2023 annual report. The company achieved revenue of 1,775 billion yuan/ +41.0% in 2023, achieving net profit of 472 million yuan/ +73.6%; realized net profit of 466 million yuan/ +72.2%; net cash flow from operating activities of 577 million yuan/ +118.2%; basic EPS was 4.71 yuan/share, up 73.2% year on year; and weighted average ROE of 43.9% /+6.72 pct.
Looking at a single quarter, 23Q4 achieved revenue of 547 million yuan/ +29.2%, achieved net profit of 158 million yuan/ +51.6%; realized net profit of 142 million yuan/ +38.9% after deduction of non-return to mother.
Brief review
Volume and price have risen sharply, and the full year of 2023 results are impressive. Looking at volume and price breakdown, in 2023, the company achieved sales volume of 38.1295 million units/ +17.6%, with an average unit price of RMB 46.56 yuan/ +19.8%. The average unit price of the US dollar was 6.64 USD/ +15.0%. The sharp rise in volume and price was mainly due to the continued improvement in the terminal market. At the same time, the sales share of high-value-added large cup products using complex surface treatment processes increased, and the annual performance was beautiful.
The effect of order size and falling raw materials increase profitability. In 2023, the company's gross profit margin was 40.72% /+6.46pct, with a net profit margin of 26.59% /+5.06pct, of which a single Q4 company's gross profit margin was 43.75% /+5.49pct, and the net profit margin was 28.93% /+4.30pct. Benefiting from the full utilization rate of the company's production capacity, and the scale effect of high-demand orders from major customers is remarkable. Prices of raw materials such as superimposed stainless steel coils have declined, and the company's profitability continues to increase. On the cost side, the company's sales, management, R&D, and finance expenses in '23 were 1.60% /-0.15pct, 4.41% /-0.07pct, 3.77% /+0.34pct, and -0.73% /+1.34pct, respectively. The company's annual exchange revenue was only 2.68 million yuan (22.09 million yuan in '22), and operational improvements increased profitability.
Implementing the big customer strategy, revenue from the largest customer increased 75%, accounting for 85%. In terms of customers, the company's largest customer PMI (operating brands including Stanley, Starbucks, etc.) contributed 1,508 billion yuan/ +75.2% of revenue in 23 years, accounting for 84.91% /+16.61pct of revenue; the second-largest customer contributed 144 million yuan/ -34.9%, accounting for 8.12% /-9.47pct of revenue; other customers contributed a total revenue of 124 million yuan/ -30.4%. Revenue from customers other than the largest customers declined, mainly due to the company prioritizing limited production capacity and resources to high-quality customers and high-quality orders to ensure customer response speed, product quality and service levels to meet customer needs.
Overseas thermos cups have ended, and sales of the major customer, the Stanley brand, expanded its circle for the second time. According to data from the General Administration of Customs, China's thermos mug exports were 4.52 billion US dollars/year on year +7.9%. Since August, the year-on-year growth rate has been continuously corrected. In January-January '24, exports accumulated +45.3% year-on-year. Downstream storage ended, and exports resumed growth. In mid-November '23, a short video showing “The ice in the Stanley thermos mug didn't melt after the car caught fire” was widely distributed on Tik Tok, and the Stanley brand followed in a series of marketing actions, and Stanley thermos mugs became very popular in the US. According to Sorftime data, on Amazon's US site, sales of Stanley thermos mugs reached 712,000/ +125.8% and 1.668,000/ +135.0% respectively in November and December 2023, up 89.4% and 64.0%, respectively. The annual sales volume in '23 was 5.813 million units/ +124.6%, and the sales volume was 1,577,000 units/ +54.3% in January-January '24. As of March 31, 2024, Stanley ranked first in sales in the Tumblers and Water Glasses (Tumblers and Water Glasses) category on Amazon in the US in the past month, accounting for 47.6%. The marketing of major customer brands has gone out of the market and continues to expand rapidly. There is plenty of room for future sales expansion, which is expected to drive the company to maintain a high increase in orders.
Domestic and Vietnamese base construction is progressing steadily, and production capacity continues to expand. By the end of 23Q3, the company had an annual production capacity of 26 million stainless steel vacuum warmers (annualized). The company increased production capacity by purchasing semi-finished products such as steel parts and stainless steel cups. Its own production capacity and production resources could only meet some high-quality major customers. The capacity utilization rate for the first three quarters of 2023 was 143.3%. Currently, the company's production capacity includes a domestic production base construction project with an annual output of 10 million stainless steel vacuum thermos cups and a project to build a production base of 13.5 million stainless steel vacuum thermos cups in Vietnam. Production capacity continues to expand.
Profit forecast: We expect the company to achieve revenue of 22.71, 27.50, and 3.229 billion yuan in 2024-2026, up 27.9%, 21.1%, and 17.4%; net profit to mother will be 5.72, 6.84, and 804 million yuan, respectively, up 21.1%, 19.6%, and 17.5%; corresponding to the latest PE is 12.8x, 10.7x, and 9.1x, respectively, maintaining a “buy” rating.
Risk warning: 1) Major customer cooperation risk: Since 2021, the company's largest customer accounts for more than 50% of sales revenue. If there are major adverse changes in the cooperative relationship between the company and existing major overseas customers, the growth rate of the company's export sales revenue will slow down, which will adversely affect the company's revenue and profit levels.
2) Risk of exchange rate fluctuations: The company's export sales account for more than 90%, mainly US dollar revenue. If exchange rate fluctuations increase in the future, the possibility that the company will experience exchange losses will also increase, which will adversely affect the company's profits. 3) Fluctuations in raw material prices: The company's raw materials are mainly stainless steel coils, stainless steel pipes, plastic particles, etc. If commodity prices fluctuate, it will affect the company's profit.