Key points of investment
Results continued to increase in 2023 and 2024Q1. In 2023, the company achieved revenue of 2.40 billion yuan (+36.0% year-on-year, same below), net profit of 730 million yuan (+89.0%) after deducting non-attributable net profit of 720 million yuan (+89.1%), falling within the previous performance forecast range. Among them, 2023Q4 achieved revenue of 6.3 billion yuan (+21.3%), net profit to mother of 200 million yuan (+47.3%), net profit after deducting non-return to mother of 190 million yuan (+42.7%). The company plans to pay a cash dividend of 15 yuan for every 10 shares, with a dividend rate of 35%. At the same time, the share capital is increased by 10 shares for every 10 shares. 2024Q1 achieved revenue of 710 million yuan (+21.1%), net profit attributable to mother of 220 million yuan (+37.2%), and net profit after deducting non-return to mother of 200 million yuan (+29.8%), and continued to increase in performance.
Profitability remains high, and cost control is good. 2023Q4's gross margin/net sales margin was 46.6%/31.6%, respectively, +1.7pct/+5.6pct year-on-year, respectively. Benefiting from the rapid release of production capacity for high-margin products (such as PA and P-S) represented by new sunscreen agents, the company's profit level remained high in 2023. 2024Q1 gross margin/net sales margin was 47.8%/30.9%, respectively, -1.2/+3.6pct year-on-year, respectively, and still remained at a high level. Looking at the cost ratio for the period 2023Q4/2024Q1, the company's expense ratio was -2.3/-2.1pct year-on-year, respectively. The main reason was that management and financial expenses were controlled relatively well.
New product expansion continues to be carried out smoothly, and structural product upgrades continuously drive profitability optimization. We believe that the company has built high barriers. The core driving factor for improving performance and profitability is an increase in the structural share of high-margin new products rather than a cyclical increase in the price of raw materials. In 2024, we expect profitability to continue to increase after the rapid release of new products: ① New sunscreen: P-S has entered a period of climbing capacity, and production capacity will gradually be released in 23 years, and it is expected that further volume will be released in 24 years. Sales volume of PA is expected to increase rapidly in 23 years after it is put into production. ② Physical sunscreen titanium dioxide: Production was put into trial operation at the end of '22, and gradually released in the second half of '23. ③ New personal care products: Amino acid surfactants and anti-dandruff agents PO completed marketing and customer certification work in 23 years, and are expected to be significantly released in 24 years.
The scale of production capacity for new cosmetic ingredients was gradually released, and overseas production capacity was laid out to open a new chapter in global production. By the end of 2023, the design production capacity of cosmetic ingredients was 33,180 tons/year, the capacity utilization rate was 75.1%, and the production capacity under construction was 5,600 tons/year. Among them, ① some production lines of the Maanshan COSS 5,000 ton new sunscreen expansion project were completed and tested, and PA production capacity was further increased. ② The construction of the Anqing Covex high-end personal care and synthetic fragrance project progressed rapidly. The first batch of 12,800 tons/year amino acid surfactant, 3,000 tons/year anti-dandruff PO, and 2,600 tons/year high-end personal care products projects were basically completed and put into operation. ③ At the same time, in November 23, the company announced that it will invest in the construction of a “10,000 ton sunscreen series product project” in Malaysia. The total investment of the project is 710,000 million yuan, which is mainly used to expand PS and AVB production capacity, further expand production capacity advantages, and take the first step in global production capacity layout.
Profit forecast and investment rating: The company is a global leader in scarce cosmetic ingredients. Demand is strong and new categories are launched quickly, driving continued high growth in performance. The company exceeded the equity incentive target in 23 (the highest assessment standard for the company's equity incentive was no less than 30% CAGR in 2023-25), and growth was continuously verified. We raised the company's 2024-25 net profit forecast from 88/1.12 billion yuan to 93/1.18 billion yuan, and added the 2026 net profit forecast of 1.46 billion yuan, corresponding to PE 16/13/10 times for 2024 to 2026, maintaining the “buy” rating.
Risk warning: Fluctuations in raw material prices, repeated epidemics, loss of important customers.