Core views:
Changhai Co., Ltd. released its 2023 annual report: The company achieved revenue of 26.1 billion yuan in 2023, -13.6% year on year, net profit to mother of 30 billion yuan, -63.8% year on year, net profit excluding non-return to mother of 280 million yuan, or -53.7% year on year. Among them, Q4 achieved revenue of 620 million yuan, -14.1% year-on-year, net profit of 8.15 million yuan, -96.2% year-on-year, and net profit without return to mother of 15.62 million yuan, or -81.3% year-on-year.
The fiberglass boom continued to bottom out in 2023, and profit resilience was better than that of peers under the integrated layout. During the reporting period, the company's sales volume of glass fiber and products was 273,600 tons, with revenue of 1.91 billion yuan. We estimate that the company's revenue per ton of glass fiber and products was 6,973 yuan (1,194 yuan year on year, better than the reduction in the industry's coarse yarn price), 5041 yuan per ton (+78 yuan year on year), gross profit per ton of 1,932 yuan (year on year -1,273 yuan), and net profit per ton was about 800 yuan (about 1,150 yuan year on year).
Looking at the 23Q4 single quarter, thanks to the advantages of the entire industry chain layout, the company flexibly adjusted the product structure and increased the sales share of high-value-added products. The unit price is expected to stabilize month-on-month, and sales volume will shrink slightly.
Looking ahead to 2024, the phased bottom of the industry may have been established. The expansion of the company's production capacity has brought about an endogenous growth rate, and a sharp rise in quantitative profit and an improvement in performance can be expected. In mid-March, leaders took the lead in sending a letter to reinstate prices, driving the mainstream categories of thick yarn to rise. The new prices were basically implemented in early April, and the phased bottom of the industry may have already been established. The company will have a production capacity of about 300,000 tons in 2023, and plans to build a new 600,000 ton project (4 150,000 ton production lines). The first phase of the first production line is scheduled to be put into operation in mid-'24. The Tianma Production Line 3 to 8 technical improvement project will be released and repaired at the end of '23. It is expected that production will resume within the year. The company's nominal production capacity is expected to reach 500,000 tons in 2024. As new production capacity is launched one after another, large-scale energy efficiency is better, and the superimposed product structure is advanced, and the company's ability to control costs and competitiveness is expected to continue to strengthen.
The scale decreased, the cost ratio increased slightly, and operating cash flow improved markedly.
Profit forecast and investment advice: The company's 24-26 EPS is expected to be 0.83/1.28/1.63 yuan, respectively, and the corresponding PE is 11.9/7.7/6.1 times, respectively. Referring to comparable company valuations, the company is given a judgment of 15 x PE in 24, corresponding to a reasonable value of 12.48 yuan/share, maintaining a “buy” rating.
Risk warning. Downstream demand fell short of expectations, industry production capacity expanded drastically, and raw fuel costs rose.