In 2023, the company actively promoted the construction of Taihua's green multifunctional nylon new material integration project. Revenue and profit increased 27% and 67% year-on-year respectively, and the growth rate accelerated in Q4. As downstream brands enter a new inventory replenishment cycle, the company will continue to release differentiated new production capacity, give full play to its leading edge in the industry, optimize product structure, enhance profitability, and open up room for growth. The company's net profit to mother is estimated to be 568 million yuan, 705 million yuan, and 864 million yuan in 24-26. The current market value corresponds to 24PE16X and 25PE13X, maintaining a highly recommended rating.
High growth in 2023 with a low base, and the growth rate accelerated in Q4.
1) In 2023, the company achieved annual revenue of 5,094 billion yuan, an increase of 27.07%; net profit to mother of 449 million yuan, an increase of 67.16%; after deducting non-net profit of 364 million yuan, an increase of 88.93% over the previous year.
The company achieved good results in leveling production and sales, removing inventory, and optimizing the product structure, and achieved high revenue and profit growth.
2) 23Q4 achieved revenue of 1,578 billion yuan, a year-on-year increase of 57.94%; net profit to mother was 122 million yuan, an increase of 527.20% year-on-year.
Revenue splitting: All products have grown, and domestic sales are better than export sales.
1) By product: In 2023, filament revenue was 2,623 billion yuan (+26.98%), of which sales volume increased by 41.83% year on year, blank cloth revenue was 1,244 billion yuan (+43.11%), and finished fabric revenue was 1,132 billion yuan (+13.12%).
2) By region: Domestic sales revenue of 4.379 billion yuan (+32.58%); export sales revenue of 642 million yuan (-3.11%).
Profitability increased significantly.
1) In 2023, the company's gross margin was 21.79%, up 0.09pct year on year; the net margin was 8.82%, up 2.12pct year on year. By product: gross profit margin of filament 17.70% (-1.43pct), gross margin of fabric 23.79% (-0.74pct), gross profit margin of finished fabric 27.67% (+4.05pct). By region: Domestic sales gross margin 19.49% (+0.16pct), export gross margin 35.06% (+3.38pct).
2) The gross margin of the 23Q4 company was 21.85%, up 4.45pct year on year; the net margin was 7.74%, up 10.61 pct year on year.
Reduced management cost rate & R&D cost rate. In 2023, the company's sales expense ratio was 1.13%, the same year on year; the management expense ratio was 4.39%, a year-on-year decrease of 1.33pct; the R&D expense ratio was 5.53%, a year-on-year decrease of 0.40pct; and the financial expenses ratio was 1.48%, an increase of 0.07pct year on year.
Cash flow is reduced, and inventory turnover efficiency is improved. 1) Net cash flow from operating activities decreased by 49.02% year-on-year to $303 million in 2023. 2) The number of inventory turnover days in 2023 was 161 days, year-on-year - 9 days. 3) The number of accounts receivable turnover days in 2023 was 54 days, +1 day compared to the previous year.
Profit forecast and investment suggestions: The company actively promotes the construction of Taihua's integrated green multifunctional nylon new material project to achieve high-quality development. As downstream brands enter a new inventory replenishment cycle, the company will continue to release differentiated new production capacity, give full play to its leading edge in the industry, optimize product structure, enhance profitability, and open up room for growth. From 2024 to 2026, the company's revenue scale is expected to be 6.182 billion yuan, 7.315 billion yuan, and 8.577 billion yuan, with year-on-year growth rates of 21%, 18%, and 17%; net profit to mother will be 568 million yuan, 705 million yuan, and 864 million yuan, with year-on-year growth rates of 27%, 24%, and 22%. The current market value corresponds to 2024PE16X and 2025PE13X, maintaining a highly recommended rating.
Risk warning: risk of large fluctuations in raw material prices; risk of capacity expansion falling short of expectations; risk of downstream demand falling short of expectations, etc.