An overview of the incident. The company released its 2023 report and 2024 quarterly report. The company achieved annual revenue of 1,141 billion yuan, -17.75% compared to the same period last year; net profit to mother was 167 million yuan, -35.79% year on year, and net profit after deduction from mother was 145 million yuan, or -39.19% year on year. 23Q4 revenue reached 368 million yuan, +51.76% YoY, +60.53% month-on-month; 23Q4 net profit of 116.555 million yuan, -72.28% month-on-month; 24Q1 achieved operating income of 302 million yuan, +31.02% YoY; net profit to mother of 28.27 million yuan, -49.84% YoY; net profit to mother of 22.66 million yuan, 47.71% YoY; operating cash flow in 2023 -0.41 million yuan, -114% YoY, operating performance Cash flow is under pressure. We believe that the performance fell short of market expectations. The core reason was that container gross margin was at a low level due to the downturn in the industry in the past, which lowered the level of net profit. As downstream container demand turns upward, container gross margin is expected to gradually recover starting with 2024Q2, and the profit situation is expected to improve quarterly.
Demand for container paint is rising, and gross margins are expected to gradually recover. Container paint revenue in 2023 was 584 million yuan, -7.87% year-on-year, with a gross profit margin of 17.04%, down 11.87 pct; container paint sales volume for the full year of 2023 was 35,600 tons, -17.25%; unit sales price was 16,400 yuan/ton, down 24.92% from the average sales price of 21,900 yuan/ton in 2022; according to the company's annual report, global container production 2023H1 was only 850,000 TEU, hitting a low point in nearly 10 years, and the container industry experienced an industry trough due to The industry is sluggish, and gross margin has declined significantly year over year. 24Q1 container sales volume was 14,700 tons, and the unit sales price was 14,800 yuan/ton, -1.79% month-on-month and -23.58% year-on-year. The company's concentration in the container sector continues to increase. According to the calculation of the consumption of 606.27 tons of container paint per 10,000 TEU, the company sold about 600,000 TEU of container paint in 2023. According to the annual container output of 2.3 million TEU (CIMC data), the company's market share was 26% (only 13.6% in 2020); the 24Q1 container paint sales price continued last year's sluggish trend, but there was a significant improvement on the demand side, reaching 14,700 tons (about 245,000 TEU). We believe that 24Q1 sales have increased significantly or that the container cycle has begun to improve. On this basis, we determine that Q2 gross margin is expected to begin to increase as the container market gradually recovers (that is, the year-on-year decline in gross margin is expected to narrow), so profits are expected to gradually improve year over year.
Demand for wind power coatings has been strong in 23 years. 24Q1 is the industry's low point, and there is considerable room for horizontal expansion in the future. Wind power paint revenue in 2023 was 510 million yuan, +27.34% year-on-year, with a gross profit margin of 46.35%, up 6.25 pct; wind power paint sales volume in 2023 was 12,400 tons, +53.91% year over year; unit sales price was 412,000 yuan/ton, down 17.26% from the average sales price of 49,800 yuan/ton in 2022; according to the company's annual report, the increase in wind power paint revenue was mainly due to increased installed demand and market development to tap customer demand, which in turn increased sales of wind power coatings; the increase in gross margin meant that raw material procurement costs increased Low; 24Q1 wind power paint sales volume was 2,169 tons, and the unit sales price was 35,800 yuan/ton, +3.96% month-on-month, -24.19%, judging that revenue was under pressure in the first quarter; we believe that Q1 was the low demand for the whole year and had a high base for the same period in '23. According to the China Telecommunication Union forecast, wind power installed capacity is expected to reach 89GW in 2024, an increase of 26% over the previous year; in addition, we believe that the company, as a leading domestic wind power coating company, will significantly benefit from new installed demand throughout the year; in addition, our judgment base is expected to increase horizontal expansion in the background of high technology below The profit margin for wind power coatings is considerable in the future.
Marine coatings have entered the testing stage, and the new blue ocean is being developed in a steady and orderly manner. In our first coverage report, we estimated that the Asian market space is about 20 billion yuan, far greater than wind power and container coatings. According to the company's announcement, the China Classification Society (CCS), the Norwegian Bureau of Shipping (DNV), and the American Bureau of Shipping (ABS) all sent ship inspectors to complete on-site sampling and sealing of products such as anti-fouling paint at the bottom of the ship, which is about to enter the testing stage; marking that the company's marine paint certification has officially entered the testing process. We believe that if the final certification is completed, the company will be expected to break into the marine paint supplier system and achieve leapfrog growth in the medium to long term; the company announced a strategic cooperation with Covestro to enter photovoltaic coatings. The future demand potential of a single PV frame coating is expected to reach tens of thousands of tons, and the blue ocean of photovoltaic coatings is also worth looking forward to.
High dividends feed back shareholders, with dividend payout rates as high as 84%. The company announced its 2023 profit distribution plan and plans to distribute a cash dividend of 1.3 yuan (tax included) to all shareholders, with a dividend amount of 140 million yuan; based on this, it is estimated that the company's dividend payment rate is 84.09%; the company uses a high dividend strategy to feed back shareholders. The path to high-quality development is steady and far-reaching.
Investment advice
In view of the time required to recover the current container paint price and the adjustment of the installed pace of the wind power market, we lowered our 2024-2025 net profit forecast to RMB 213/292 million yuan (previously RMB 301/353 million yuan), maintaining the 2024-2025 company revenue forecast of 15.43/1.884 billion yuan; corresponding EPS forecast of 1.97/2.71 yuan (original 2.79/ 3.27 yuan), and added 2026 revenue/net profit to mother/EPS forecast to be 2,229 million yuan/3.55 billion yuan, respectively 100 million yuan/329 yuan; corresponding to the closing price of 36.53 yuan on April 23, 18.50/13.50/11.10x PE. Maintain a “buy” rating.
Risk warning
Production capacity release falls short of expectations, new product development progress falls short of expectations; downstream demand falls short of expectations; costs are higher than expected; systemic risks.