Key points of investment
In 2023, the company achieved revenue of 2,783 billion yuan, up 26% year on year 1) Looking at the full year, the 2023 company achieved revenue of 2,783 billion yuan, up 26% year on year, and realized net profit of 371 million yuan, up 16% year on year, in line with expectations. 2) Looking at 2023Q4 alone, 2023Q4 achieved revenue of 741 million yuan, a year-on-year increase of 21%, and achieved net profit of 97 million yuan to mother, an increase of 50% over the previous year. We expect the sharp increase in Q4 revenue mainly due to the Red Sea incident at the end of 2023, due to a rise in sugar alcohol orders from overseas customers, and a 14% month-on-month increase in Q4 overseas revenue. We expect the sharp increase in net profit in Q4 mainly due to a low base in 22Q4 and a high increase in revenue in 23Q4.
Gross profit margin has been rising steadily, and overall fee control is adequate
In terms of gross margin, we achieved a gross profit margin of 24.2% for the full year of 2023, an increase of 1 pcts over the previous year. We expect this is mainly due to reasonable optimization of raw material costs. In terms of cost rates, looking at the full year of 2023, sales/management/R&D expenses rates have all been optimized. The company's sales expense ratio for the 2023Q4 single quarter was 2.3% and the management expense ratio was 3.7%, an increase of 1 pcts over the previous month. We expect this is mainly due to the company's early arrangement of orders for the new factory in Zhoushan and increasing employee remuneration. In terms of net interest rate, the company's net interest rate for the full year of 2023 was 13.4%, a year-on-year decline, mainly due to preemptive sales expenses and management expenses.
Convertible bonds have been successfully implemented, and new production capacity in Zhoushan is about to be released
The company's convertible bond project has been successfully implemented, and new production capacity in Zhoushan can be expected to continue to be implemented. The convertible bond project is expected to increase production capacity by about 1 million tons, covering high-margin products such as sorbitol and allodonose. Production capacity is a major bottleneck in the company's development at this stage. In 2022, the company's crystal sugar alcohol production capacity utilization rate has exceeded 95%, close to saturation, and it is urgent to build new production capacity. We expect the production capacity of the new plant to be gradually implemented in 2024Q3. Preliminary preparations are adequate, and the new production capacity can be rapidly absorbed. In 2023, the company added 68/19 domestic/overseas traders. We believe that behind the rapid increase in new customers, the company is actively making sufficient reserves for the digestion of production capacity in Zhoushan. As the company expands its customers well, we are optimistic that production capacity will be rapidly digested after the new plant is launched, and performance will be released quickly.
Profit forecasting and valuation
The company's main business is sugar substitute manufacturing. We expect the company to achieve revenue of 32.03/36.85/4.239 billion yuan in 2024-2026, an increase of 15%/15% over the previous year, and an estimated net profit of 431/5.17/ 610 million yuan, a year-on-year growth rate of 16%/20%/18%, corresponding to PE of 11/9/8 times. Considering that the sugar-free era has just arrived in China, demand for sugar substitutes is on the rise. Combined with the company's broad prospects and certain competitiveness, it maintains a “buy” rating.
Risk warning: Product price fluctuations, exchange rate fluctuations, shipping cost fluctuations, increased market competition, etc.