The company released its 2023 annual report & 2024 quarterly report: in 2023, it achieved revenue of 4.982 billion yuan, +18.98% year over year; net profit to mother of 776 million yuan, +25.48% year over year; net profit after deducting non-return to mother of 742 million yuan, +23.07% year over year. Among them, 23Q4 achieved revenue of 1,308 billion yuan, +9.09% year-on-year, net profit of 162 million yuan, +31.71% year-on-year; net profit after deducting non-return to mother of 151 million yuan, +24.79% year-on-year. The company's gross profit margin in 2023 was 28.03%, +1.19pct year on year, net profit margin 15.57%, +0.8pct year on year, of which 23Q4 gross profit margin was 27.54%, +4.74pct year on year.
24Q1 achieved revenue of 1,267 billion yuan, +2.43% year over year, net profit to mother of 221 million yuan, +32.34% year over year; net profit after deduction of non-return to mother was 210 million yuan, +35.48% year over year. The 24Q1 gross profit margin was 30.59%, +6.94 pcts year over year.
Core products, molded bottles & brown bottles, are growing rapidly. In 2023, sales of the company's main products, molded bottles and brown bottles, achieved rapid growth. In 2023, the molded bottle series products achieved sales of 375,900 tons, +23.65% year over year; achieved revenue of 2.64 billion yuan, +29.36% year over year; accounting for +3.65 pct to 45.45% year over year in revenue. Brown bottles sold 272,700 tons, +28.73% year over year; achieved revenue of 1,118 billion yuan, +29.1% year over year; accounting for +1.76pct of revenue to 22.44% year over year. In terms of profitability, the unit price of the company's molded bottles in 2023 was 6024 yuan/ton, +4.62% year on year; gross profit margin was 39.17%, -0.59pct year on year. The unit price for brown bottles was 4,100 yuan/ton, +0.29% year on year; gross profit margin was 23.78%, +3.04pct year on year.
Cash flow is abundant, and profit commissions and incentive withdrawals are completed after performance standards are met. The company's expense ratio for the 2023 period was 8.79%, +0.43pct year on year, of which the sales expense ratio was 2.96%, +0.32pct year on year, mainly due to increased travel expenses and commissions; the management expense ratio was 3.77%, +0.33pct year on year, mainly due to profit growth rewards accrued in the current period (employee remuneration in 2023 +34.71 million year on year, +48.31% year on year). The company's net operating cash flow at the end of 2023 was 1,048 billion yuan, +315.14% year-on-year, mainly due to an increase in cash received from the sale of goods and services in the current period. In addition, the 2023 incentive fund of RMB 34.75 million will be calculated to include the costs and expenses of 2024.
Demand for borosilicate molded bottles is booming, and overseas products continue to contribute to the increase. Driven by consistent evaluation and continuous procurement, demand for borosilicate molded bottles is strong, and sales have maintained rapid growth, becoming the main contributor to the company's new profits. The company continued to expand the production capacity of borosilicate molded bottles. In 2023, the company completed the construction of a borosilicate molded bottle workshop (with two kilns), and 1 of these kilns was put into operation in November 2023. In 2023, the company's overseas revenue was 1.36 billion yuan, +26.44% year on year, accounting for 27.29% of revenue, +1.61 pct year over year. Under the premise of steadily expanding the export share of brown bottles, daily chemical bottles, and injectable molded bottle products, the company is expected to continue to contribute to performance growth in 2024 in line with the opportunities of consumption upgrades and product iteration, focusing on developing overseas cosmetic packaging products, etc.
Refined management reduces costs and increases efficiency, and the 2024 price reduction of soda ash unleashes profit elasticity. The company continues to promote cost control and refined management. In response to the high operation of raw materials and fuel prices such as soda ash, coal, and borax in 2023, various methods were used to save costs. Production costs were -4.95% year-on-year in 2023, and the conversion efficiency of the four benchmark workshops increased by an average of 36.01%. Since the beginning of 2024, the price of soda ash has dropped significantly. The average spot price of soda ash in 24Q1 was 2,415 yuan, -16.78% year-on-month, and -13.71% month-on-month. As of April 22, 2024, the spot price of soda ash had dropped to 2,080 yuan. The significant reduction in cost is expected to bring the company profit improvement and flexibility in 2024.
Investment suggestions: We are optimistic about ① consistent evaluations driving the volume of borosilicate molded bottles; ② continued high growth in overseas sales; ③ profit elasticity due to falling soda ash costs. The company's revenue for 2024-2026 is estimated to be $56.21, 65.13, and 7.201 billion yuan, respectively, and net profit to mother is 1,051, 12.11, and 1,392 billion yuan, respectively, corresponding to PE 18, 15, and 13 times. Maintain a “Recommended” rating.
Risk warning: Risk of fluctuations in raw material and fuel costs, lower than expected policy progress, and fluctuations in overseas demand.