The company's net profit after deducting non-return to mother in '23 was 281 million yuan, down 53.66% year on year. The company released its annual report. It achieved annual revenue/net profit of 26.07/296 million yuan, -13.59%/-63.77% year-on-year, and realized net profit of 281 million yuan without return to mother for the whole year, or -53.66% year-on-year. Among them, Q4 achieved revenue/net profit to mother of 619.08 billion yuan in a single quarter, -14.11%/-96.21% year-on-year, and net profit after deducting non-return to mother of 0.16 million yuan, or -81.26% year-on-year.
The volume and price of the glass fiber business have plummeted, and the current price has bottomed out. The bottom of profit may have formed the company's revenue of 1,908 billion yuan for glass fiber and products in 23, a year-on-year decrease of 15.8%. The annual sales of glass fiber and products was 274,000 tons, down 1.27% year on year. We estimate that the average price per ton fell 14.7% year on year to 6,973 yuan. Affected by the increase in depreciation costs and the decrease in product sales due to the construction of new production lines, the cost of tons increased slightly by 1.5% year on year to 5041 yuan. Ultimately, gross profit per ton was 1,932 yuan/ton, down 39.7% year on year, and gross margin decreased by 11.5 pct year on year to 27.7% year on year. The glass fiber industry was affected by demand pressure and increased competition in '23, and prices continued to fall. At the end of March this year, the company also raised the prices of various types of Changhai and Tianma glass fiber products by 300-500 yuan/ton on March 25. Domestic demand is expected to increase steadily in 24 years, and the overseas inventory cycle is expected to boost the company's short-cut felt sales. The company's overseas revenue accounts for about 25%, and the gross profit margin of overseas business is 36%, which is higher than the domestic one of 21%. The first line of the company's 30,000 tons of pond kilns was discharged and repaired at the end of 23. Of the 600,000 ton construction project, the first phase of the 150,000 ton first line is expected to be put into operation in 24, and construction of the second line has already started. We believe that with the continuous expansion of the company's production capacity, sales growth is still quite flexible. The company's chemical business revenue in '23 was 640 million yuan, down 6% year on year. Annual sales volume was 78,600 tons, up 3.26% year on year. The sales price per ton cost per ton gross profit was 8132/6899/1233 yuan respectively, all down 9% year on year, and gross margin fell slightly by 0.08 pct year on year to 15.16%. Relying on the advantages of industrial chain integration, the company is expected to broaden product categories around the field of new materials and seek new profit growth points.
Expense ratios declined and debt ratios remained low
The company's overall gross profit margin in '23 was 24.5%, -8.9pct. Among them, the overall gross profit margin for the Q4 quarter was 19.2%, and -8.0/-4.9pct yoy, respectively. The cost ratio for the 23-year period was 11.45%, +1.77pct. Among them, sales/management/R&D/finance expenses ratios were +0.47/+0.96/+0.75/ -0.42pct, respectively. The decline in financial expenses was mainly due to an increase in interest income. In the end, the non-net interest rate was deducted 10.8%, -9.3pct year-on-year. Net operating cash flow in '23 was 719 million yuan, +158 million yuan year on year, mainly due to an increase of 11.83 pcts to 85.15% year on year. The company's balance ratio at the end of '23 was only 29.4%, +5.6 pct year on year, so there is still plenty of room for leveraged expansion.
Continue to be optimistic about the company's endogenous growth and maintain a “buy” rating
We continue to be optimistic about endogenous growth brought about by the company's medium- to long-term capacity expansion. Considering that the company's performance declined a lot, the 24-25 net profit forecast was lowered to 37/450 million yuan (previous value: 49/61 million yuan), and the net profit forecast for 26 years was increased by 520 million yuan. Referring to comparable company valuations, we gave the company 14x target PE for 24 years, lowered the target price to 12.55 yuan, and maintained a “buy” rating.
Risk warning: the company's production capacity investment falls short of expectations, demand for glass fiber is declining, industry production capacity is expanding drastically, etc.