Description of the event
The company released its 2023 annual report. In 2023, it achieved total revenue of 753 million yuan, an increase of 24.4% year on year; net profit to mother of 43.549 million yuan, down 7.4% year on year; after deducting non-net profit of 403.16 million yuan, an increase of 21.7% year on year. 2023Q4 achieved revenue of 203 million yuan in a single quarter, up 60.5% year on year, and realized net profit of 6.2663 million yuan, up 25.2% year on year. The 2023 profit distribution plan distributes a cash dividend of 0.8 yuan (tax included) for every 10 shares to all shareholders.
Incident reviews
Revenue and sales continue to grow positively, and the trend of performance optimization is improving. In terms of revenue, the company's 2023 revenue increased 24.4% year over year, and 2023Q4's single quarter revenue increased 60.5% year over year, mainly due to continued increase in polylactic acid resin sales. PLA resin sales volume in 2023 was 41,800 tons, a year-on-year increase of 42.5% over the previous year (29,300 tons). In terms of profit, net profit to mother in 2023 fell 7.4% year on year, mainly due to the large amount of government subsidies in the same period last year. From an operating perspective, net profit after deducting non-net profit increased 21.7% year over year.
The company's performance continues to improve, and the long-term development trend is positive.
The industry is greatly affected by policies, “exchanging price for volume” to expand market share. Since 2023, due to factors such as increased competition in the polylactic acid industry and the slow recovery in demand in the downstream consumer market, foreign manufacturers have adopted a low price strategy to enter the Chinese market, and the import price of polylactic acid has decreased by 10-15% compared to the same period last year. In order to actively seize the market, the company adjusted product prices by a certain margin. In 2023, the company's average price of PLA pure material was 183,000 per ton, down 13% from last year's average price of 21,000 per ton; the price of PLA modified material was 16,200 yuan/ton, down 15% from 1.9 million/ton last year. Against the backdrop of a sharp decline in PLA prices, the company maintained stable profitability through cost reduction and product structure optimization. The gross margin and net interest rate in 2023 were 13.11%/5.78% respectively, down 0.27pct/1.99pct from 2022.
The policy continues to advance, and we are waiting for the number of fund-raising projects to be released. In the first half of 2023, the Ministry of Commerce and the Development and Reform Commission issued the “Administrative Measures on the Use and Report of Single-Use Plastic Products by Commercial Operators”. The “Measures” make very specific provisions on the regulations, market supervision and management, and legal responsibilities of commercial operators. They have been implemented since June 20. Market supervision has not decreased but increased, and there is plenty of room for long-term development. The company is the first domestic enterprise to break through lactate and achieve mass production of PLA. Currently, the company's production capacity is 60,000 tons, and part of the construction unit for the 150,000 ton polylactic acid project has been completed. The first phase of 75,000 tons of equipment has been purchased. It was originally expected to be put into operation in the second half of 2024. Considering recent macroeconomic environment and market factors, the company is slowing down construction progress, and the first phase of 75,000 tons is expected to be put into operation until March 2025. The second phase of 75,000 tons is expected to further increase the company's market share.
Investment advice
We predict that from 2024 to 2026, the company will achieve revenue of 1,022/13.68/1,844 billion yuan, respectively, an increase of 35.6%/33.9%/34.8%; net profit to mother of 0.59/0.81/108 million yuan, an increase of 36.5%/36.2%/32.8%, corresponding EPS of 0.29/0.40/0.53 yuan, PE of 32.1/23.6/17.7 times, maintaining the “increase in holdings” rating.
Risk warning
The risk of rising raw materials, the risk of production capacity expansion falling short of expectations, the risk of increased market competition, the risk that the company's business development will be greatly affected by downstream demand, and the risk that policy implementation will fall short of expectations.