Core views
In 23Q4, the company achieved revenue of 1,855 billion yuan/ +31.4%, net profit of 166 million yuan/reversal of losses due to mother, and net profit of 159 million yuan/reversal of losses. The 23Q3 price increase was well implemented in the previous period. The cost of wood pulp raw materials increased only slightly, and profitability continued to improve month-on-month in 23Q4. The gross margin in the single quarter was 15.11% /+19.3pct, and the net margin was 9.01% /+10.3pct. The gross profit margin and net margin increased 4.4/2.4 pct respectively compared to 23Q3. Looking at volume and price splitting, we estimate that the company achieved sales volume of 307,000 tons/ +42.6% in a single quarter in 23Q4, and calculated an average net profit of 544 yuan/tonne +173 yuan month-on-month. In terms of production capacity, by the end of '23, the company's total paper production capacity was 1.416 million tons/ +4.9%. The total paper production capacity is expected to reach more than 2 million tons by the end of '24, double by the end of '25, and capacity construction is accelerating.
occurrences
The company released its 2023 annual report. In 2023, the company achieved revenue of 6.519 billion yuan/ +9.35%, net profit attributable to mother of 273 million yuan/ +32.97%, after deducting net profit of 252 million yuan/ +54.41%. Net cash flow from operating activities was RMB 1,077 million/+2874.47%; EPS (basic) was 0.68 yuan/share, +33.33% YoY, and ROE weighted at 11.83% /+2.28pct.
Looking at a single quarter, 2023Q4 achieved revenue of 1,855 billion yuan/ +31.4%, net profit of 166 million yuan/reversal of losses due to mother, and net profit of 159 million yuan/reversal of losses.
Brief review
23Q4 sales increased rapidly, and the implementation of price increases led to a month-on-month increase in net profit.
1) Volume and price split: 23 The company achieved sales volume of raw paper of 1.056 million tons/ +9.8% throughout the year, estimated an average price of 6171 yuan/ -0.4% per ton, and a net profit of 258 yuan/ +21.1% per ton. Looking at a single quarter, we estimate that the company achieved sales volume of about 307,000 tons/ +42.6% in 23Q4. The sharp increase in production and sales was mainly due to the company's continued release of new production capacity and the shutdown of some production lines during the same period last year, which formed a low base. We estimate the average tonne price of 23Q4 at 6038 yuan/ -7.8% (month-on-month +394 yuan), tonnage cost 5126 yuan/ -24.9% (month-on-month ratio +308 yuan), tonne net profit of 544 yuan/reverse loss (+173 yuan month-on-month) 2) In terms of profitability: the company's gross margin in 2023 was 9.59% /+0.8pct, and the net interest rate was 4.21% /+0.8pct. Looking at a single quarter, 2023Q4 gross margin was 15.11% /+19.3pct, and net margin was 9.01% /+10.3pct. Benefiting from the implementation of the price increase letter issued in 23Q3, the cost of wood pulp raw materials increased only slightly, profitability continued to improve month-on-month in 23Q4, and gross profit margin and net interest rate increased 4.4/2.4 pct respectively compared to 23Q3.
The consumer series products performed brilliantly. By product: In 2023, the company achieved revenue of 3.321 billion yuan/ -1.6%, gross profit margin of 3.31%/-6.5pct; household consumer materials series (including glassine paper, transfer printing paper, drawing paper) revenue of 2,230 million yuan/ +21.3%, gross profit margin 20.04% /+8.0 pct; publishing and printing materials series (special cultural paper) revenue of 826 million yuan, gross profit margin 5.59%; industrial packaging materials series (corrugated paper) revenue of 0.05 billion yuan/ -99.99.3% , gross profit margin -27.16% /-22.1pct; the industrial supporting materials series (stainless steel liner, CTP liner, glass partition paper, etc., from the newly acquired Wuzhou Special Paper Longyou factory) generated revenue of 92 million yuan, with a gross profit margin of 13.16%. ② By region: In 2023, the company achieved domestic revenue of 5.712 billion yuan/ +9.6%, gross profit margin of 8.38% /+0.8pct; overseas revenue of 762 million yuan/ +4.0%, gross profit margin of 17.68% /+1.6pct.
Production capacity construction at the Jiangxi and Hubei bases is progressing in an orderly manner, and the rapid commissioning phase will begin in 24-25. In '23, the company put into operation a new production line of 22,000 tons of digital transfer paper and 18,000 tons of drawing paper, and acquired Longyou Kaifeng Special Paper. By the end of '23, the company's total paper production capacity was 1.416 million tons/ +4.9%. The 4 paper production lines at the new Hubei base and 1 paper production line at the Jiangxi base will be put into operation within 24 years (of which the first phase of the Hubei base is expected to be put into trial production at the end of 24H1). The total paper production capacity is expected to reach more than 2 million tons by the end of '24, and the total production capacity will double by the end of '25, with good transportation convenience and energy self-supply layout. In terms of raw materials, the 300,000 ton pulp production line built by the company at the Jiangxi base has been successfully completed. It is expected that it can be put into use in 24Q1, and the production capacity balance of food white cards and cultural pulp paper will be quickly reached. If calculated at the current market price, the average ton cost will be reduced by about 300 yuan after the slope climbing is completed.
Investment advice: Wuzhou Special Paper's 2024-2026 revenue is expected to be 81.8, 101.0, and 11.61 billion yuan, respectively, up 25.5%, 23.4%, and 15.0%; net profit to mother will be 5.56, 7.10, and 825 million yuan, respectively, up 103.6%, 27.8%, and 16.2% year on year; corresponding P/E will be 10.7x, 8.4x, and 7.2x, maintaining a “buy” rating.
Risk warning: Downstream demand falls short of expectations: As a leading domestic specialty paper enterprise, the company's main products include food cardboard, glassine paper, etc. Downstream demand will mainly affect the company's product sales, and at the same time, it will be difficult to support the sales price of finished paper during the rapid decline in pulp prices, which will ultimately adversely affect revenue and profit; risk of fluctuations in pulp prices: the company's wood pulp raw materials account for 50%-60% of the cost. Under wood pulp price fluctuations, if the company makes mistakes in judgment, it will raise the company's production costs and have a significant impact on the company's profit capacity construction; Less than expected: The company is in Hubei The construction of the Jiangxi base is being accelerated. If production capacity construction falls short of expectations due to capital, policy and other factors, it may affect the company's growth.