Introduction to this report:

The company's 2023 annual report and 2014 quarterly report are in line with expectations. The company's first-class molded bottles maintained high growth, driving strong revenue growth, and declining costs of raw materials such as soda ash led to continuous optimization of profitability.

Key points of investment:

Maintain an “Overweight” rating. In 2023, it achieved revenue of 4.982 billion yuan, +18.98% year on year, net profit of 776 million yuan, +25.48% year over year, 24Q1 achieved revenue of 1,267 billion yuan, +2.50% year over year, and achieved net profit of 221 million yuan compared to mother, +32.59% year over year, in line with expectations. It increased EPS in 2024-25 to 1.51 (+0.02) /1.77 (+0.05) yuan, and increased the target price to 33.84 yuan according to the comparable company's PE 22 times yuan.

First-class molded bottles have maintained high growth, and the main glass bottle business has maintained a steady increase in revenue. By product, revenue from molded bottles/ brown bottles/ ampoules/ control bottles/ butyl rubber stoppers was +29.36%/29.10%/24.42%/18.05%/12.66% year-on-year, respectively. With logistics restoration and the normalization of general medical expenses, the company's revenue growth center increased markedly in '23. The 24Q1 company's revenue growth is slowing down. We judge that it is mainly a decline in trade business. It is estimated that the main glass bottle business growth rate is still above 10%. Among them, Q1 is expected to ship 5-6 billion first-class bottles, maintaining a high increase of +60-70% over the same period last year.

The gross margin reached a new high, and the net profit margin was affected by the calculation of incentive expenses. The comprehensive gross margin of 23Q4/24Q1 was 27.54% and 30.59%, respectively, compared with +4.74pct and +6.94pct, respectively. Among them, 24Q1's gross margin hit a new high in recent years. On the one hand, the increase in the proportion of first-class molded bottles led to product structure optimization, and the downward shift in the 23H2 soda ash price center also contributed positively to gross profit. In terms of net interest rate, the company accrued a 23-year incentive fund of 34.75 million yuan. We expect part of the accrued expenses to reflect 24Q1.

The production capacity of first-class bottles continues to be released. Currently, new entrants to the Class 1 molded bottle market still face the two barriers of certification and cost. Collection and landing one after another will continue to catalyze demand for Class 1 bottles. According to our 24Q1 shipment estimates, the company's shipment volume of Class 1 bottles is expected to exceed 2 billion in 24 years.

Risk warning: Raw fuel prices have risen sharply, and injectable consistency evaluations are driving down expectations.