Event: The company released its annual report for 2023 and its report for the first quarter of 2024. In 2023, the company achieved revenue of 1,721 billion yuan, -12.9%; net profit to mother of 45 million yuan, -74.69% year over year; deducted non-net profit of 0.18 million yuan, -88.49% year over year; and basic earnings per share of 0.24 yuan. In 23Q4, the company achieved revenue of 491 million yuan, +24.2% year-on-year; net profit to mother of -0.18 million yuan, which changed from profit to loss year-on-year; deducted non-net profit of -0.2 billion yuan, which changed from profit to loss year-on-year. In 24Q1, the company achieved revenue of 499 million yuan, +52.03% year over year; net profit to mother was 43 million yuan, +136.01% year over year; after deducting non-net profit of 0.1 billion yuan, +8.28% year over year.
The decline in sales in '23 weakened the scale effect, and the calculation of impairment of goodwill led to a sharp decline in profit margins.
Gross profit margin: In 2023, the company's comprehensive gross margin was 19.23%, -3.01 pct. Among them, the gross margin for 23Q4 was 20.35%, -3.48 pcts year-on-year, and +0.14 pcts month-on-month. In 24Q1, the company's gross margin was 19.33%, +0.15 pct year over year and -1.02 pct month over month. The decline in export sales revenue made the company's production capacity utilization rate lower, and amortization of fixed costs per unit product increased, which in turn led to a decline in gross margin.
Expense rate: In 2023, the company period cost rate was 15.19%, +3.16 pct year-on-year. Among them, the sales/management/R&D/finance cost rates were 5.37%/6.38%/3.28%/0.16%, respectively, with year-on-year changes of +0.41 pct/+1.69 pct/+0.07 pct/+1 pct. In 24Q1, the company's cost rate was 16.75%, +0.35 pct year-on-year. Among them, the sales/management/R&D/finance ratio was 5.17%/6.4%/3.18%/2%, respectively, with year-on-year changes of -0.28 pct/+1.48 pct/-1.35 pct/+0.49 pct.
Deducted non-net interest rate: In 2023, the company deducted non-net interest rate of 1.04%, -6.82 pct year-on-year. Among them, the company's deducted non-net interest rate for the 23Q4 single quarter was -4.44%, -11.06 pct year-on-year, and -8.11 pct month-on-month. In 24Q1, the company deducted non-net interest rate of 1.98%, -0.8 pct year-on-year, and +6.41 pct month-on-month. The sharp decline in non-net interest rate deducted in '23 is mainly due to the company's goodwill impairment on Zhejiang Home Debao Technology and Sumter Easy Home, totaling 55 million yuan in 2023, including other impairment values.
Biodegradable products are growing rapidly, and the domestic sales business has performed well.
By product, in 2023, the company's plastic products reached 1,301 million yuan, -21.53%; biodegradable products reached 262 million yuan, +87.39% year-on-year; and vegetable fiber products reached 94 million yuan, +4.71% year-on-year. All parts of the world continue to promote the implementation of the “plastic ban” policy. The biodegradable products and plant fiber products industry has broad prospects for development, and the company's forward-looking large-scale layout of card slots is expected to maintain rapid growth.
Looking at the subregion, in 2023, export sales reached 988 million yuan, or -35.21%. Mainly affected by factors such as the international situation and inflation, overseas market demand weakened, and downstream channels continued to remove inventory; domestic sales reached 733 million yuan, +62.5% year over year, continuously improving the national layout, strengthening customer service quality, and continuously achieving customer breakthroughs.
In the future, the company will gradually complete production line construction at production bases in Thailand, the United States, Ningbo, and Guangxi, while also speeding up the layout of domestic production bases in East China, South China, North China and Central China; it is expected that export demand will gradually recover, and the domestic sales market will maintain rapid expansion.
Investment advice: The company is a leader in traditional plastic products. Domestic sales are growing rapidly, export demand is improving, and its future performance is expected to maintain rapid growth. The company is expected to achieve basic earnings per share of 0.96/1.11/1.33 yuan in 2024/25/26. The corresponding PE is 21X/18X/15X, maintaining a “recommended” rating.
Risk warning: Risk of large fluctuations in raw material prices, risk of export demand falling short of expectations, risk of policy implementation falling short of expectations, risk of increased market competition.