Incident: The company achieved operating income of 2.40 billion yuan in 2023, +35.99% year on year, and net profit to mother of 734 million yuan, +89.02% year over year. 24Q1 achieved operating income of 712 million yuan, +21.10% year over year, and net profit to mother of 220 million yuan, +37.16% year over year.
Downstream demand for cosmetic active ingredients continues to grow, contributing to core growth. By product, active cosmetic ingredients and raw materials achieved revenue of 2,070 billion yuan in 2023, +43.68% year-on-year; synthetic fragrances achieved revenue of 308 million yuan, +6.83% year-on-year. In terms of production capacity, the design capacity of cosmetic active ingredients is 33,180 tons/year, and the annual production capacity increased by 6,110 tons; the company's first batch of amino acid surfactants and PO products were put into production in 23Q3. It is expected that new personal care ingredients will gradually be released, and the influence of overseas brands in the market will be further consolidated.
The release of high-margin production capacity for new products helps improve the company's profitability. In 2023, the company's gross profit margin was 48.83%, +12.17pcts year on year; net profit margin was 30.57%, +8.58pcts year over year. Among them, cosmetic active ingredients and their raw materials/synthetic fragrances achieved gross profit margins of 53.06%/23.60%, +12.95pcts/+0.39pcts, respectively. Benefiting from a significant increase in sales volume of new sunscreen agents such as P-S, EHT, and PA, the company's profit level remains high. In terms of costs, the company develops new products and processes in line with changes in market demand. In 2023, R&D expenses were 113 million yuan, +40.79% compared with the same period last year, with a R&D cost rate of 4.72%. The 24Q1 company's gross profit margin was 47.82%, -1.21pcts year on year, mainly due to the increase in fixed costs for the construction of a series of investment projects in Anqing and Maanshan. The 24Q1 net profit margin was 30.87%, +3.61 pcts year over year.
New sunscreens continue to be released, categories of personal care ingredients expand, and diversified layouts open up room for growth. The company continues to expand production of traditional and new sunscreen products. The construction of high-end personal care products and synthetic fragrance projects is progressing steadily, and production capacity will be further released after completion. At the same time, the company launched a project with an annual output of 10,000 tons of sunscreen products in Malaysia to promote overseas production capacity layout and further enhance production capacity advantages.
Investment advice: Demand for sunscreen remains high, and the application field of sunscreen continues to expand. As a leading global sunscreen manufacturer, the company's production capacity expansion combined with category expansion has brought high growth. The company's EPS is expected to be 5.46/7.04/8.57 yuan respectively from 2024 to 2026, maintaining a “buy” rating.
Risk warning: raw material price fluctuation risk; exchange rate fluctuation risk; new production capacity investment falls short of expectations.