Incident: The company released its 2023824Q1 financial report on April 17, achieving revenue of 616 million yuan in 2023, -25.00%;: Net profit to mother was 0.48 million yuan, -43.65%. 24Q1 achieved revenue of 190 million yuan, +7.42% year over year and +6.55% month on month. Net profit attributable to mother was RMB 22 million, +31.25% YoY and +107.29% YoY. The company plans to pay a cash dividend of 2.54 yuan (tax included) for every 10 shares to all shareholders, with a total dividend payment rate of 63.06%, and the company plans to use part of the overraised capital to buy back shares of 30 million yuan to 40 million yuan and use it for equity incentives.
The decline in sales volume in 2023 dragged down revenue, and since 23Q4, revenue has continued to grow with the expansion of scale. The company's overseas revenue accounts for more than 90%. The high base after the epidemic in 2023, the European economic growth slowdown & the Russian-Ukrainian war affected consumer demand for non-essential goods in the European market, and the imposition of tariffs by the US, and the decline in sales dragged down the year-on-year decline in revenue. By product, 1) New stone and wood composites: 2023 revenue of 296 million yuan, -5.16% year-on-year. Sales volume -7.11% YoY, average price +2.11% YoY. 2) High-performance wood-to-composite products: 2023 revenue of 290 million yuan, -38.01% year-on-year. Sales volume was -42.89% YoY, average price +8.54% YoY. The company's 23Q4 revenue was 178 million yuan, +18.29% year-on-year. Since 23Q4, as the company expanded in size and sales picked up, revenue continued to grow.
The gross margin of overseas business continues to rise, boosting own brands or enhancing medium- to long-term profit centers. As the company's sales scale expands, the gross margin of overseas business continues to rise. In 2023, the company's gross profit margin was 25.89%, +4.14pcts year-on-year. The 24Q1 gross margin was 27.95%, +1.23pcts year over year and -0.32pcts month-on-month. In 2023, the gross profit margin of new stone wood-plastic composites and high-performance wood-plastic composites was 26.7%/24.58%, +4.65pcts/+3.93pcts; in 2023, the company's overseas/domestic business gross margin was +4.89pcts/1.05pcts year-on-year. The company's 2023 listing and issuance service fees, overseas acquisition consulting fees, and overseas factory establishment led to a year-on-year management fee ratio of +2.35 pcts. At the same time, due to the accelerated expansion of overseas markets, the sales expense ratio was +3.61 pcts year over year. As an ODM manufacturer, the company actively develops its own brand in the US market or drives the growth of medium- to long-term profit centers.
The expansion of production capacity in Vietnam & Thailand is driving revenue growth and accelerating the expansion of the market in the deceased country. According to the company's announcement, the company plans to implement a lightweight co-extruded wood-plastic composite material expansion project with an annual output of 20,000 tons and a technical improvement project for a new stone wood-plastic composite digital printing production line with an annual output of 6 million square meters. The number of projects under construction at the end of 2023 increased by 74.9% compared to the beginning of the year, and is expected to effectively increase the production capacity of wood plastic, stone and wood plastic. In addition, the company has accelerated the expansion of the US market and acquired agents to increase the construction of channels in the US market. In 2023, Vietnam's Sentai, Thailand's Sentai, Knight Holdings, Knight Reserve, and Sentai Trading were established, and Hongtai Design was cancelled. It is expected that the company's overseas revenue will continue to grow as the European market recovers and the US market continues to expand. The company's net profit for 24/25/26 is estimated to be 1.00/149/249 million yuan, covered for the first time, giving it a “buy” rating.
Risk warning:
Overseas production capacity construction falls short of expectations; US market expansion falls short of expectations; competition intensifies risks.