The company released its 2023 annual report. In 2023, it achieved revenue of 5.622 billion yuan, a year-on-year increase of 2.00%; net profit to mother of 349 million yuan, an increase of 5.14% over the previous year; net profit after deducting non-return to mother was 354 million yuan, an increase of 14.96% over the previous year. Among them, the fourth quarter achieved revenue of 1,360 billion yuan, up 4.83% year on year, down 8.82% month on month; net profit to mother was 77 million yuan, up 50.27% year on year and down 23.22% month on month; net profit after deducting non-return to mother was 79 million yuan, up 63.80% year on year and down 19.35% month on month. In 2023, the company plans to distribute a cash dividend of 1.50 yuan (tax included) to all shareholders for every 10 shares. I am optimistic about the steady development of the company's main business, the continuous expansion of new products, and the maintenance of the purchase rating.

Key points to support ratings

In 2023, the company's revenue, net profit attributable to mother, and net profit after deducting non-return to mother increased year-on-year, and the expense ratio declined during the period. In 2023, the company's net profit withheld from mother increased 14.96% year on year, and non-recurring profit and loss was -50531 million yuan (including 9.4066 million yuan in government subsidies), a decrease of 34.1963 million yuan compared with 2022. In 2023, the company's gross margin was 16.18%, down 0.42 pct year on year; net profit margin was 6.24%, up 0.18 pct year on year; the period expense ratio was 4.61%, down 0.51 pct year on year, of which the financial expense ratio was 0.28%, down 1.05 pct year on year, mainly due to an increase in exchange income and interest income.

The main industries of polyester industrial yarn and tire curtain cloth are developing steadily, and production capacity expansion and overseas layout are progressing in an orderly manner. In 2023, the company's polyester industrial yarn achieved revenue of 2,707 billion yuan (YoY +0.90%), output of 287,900 tons (YoY +17.09%), sales volume of 228,400 tons (YoY +13.16%), annual average price of 11,400 yuan/ton (-10.83% YoY), and gross profit margin of 16.49% (YoY +0.20pct). According to the 2023 annual report, the production capacity of Vietnam's 110,000 tons of differentiated polyester industrial yarn (phase 1) project has been fully released, and 23H2 has begun to achieve full production and sales; the commissioning of the Vietnam project helped increase the company's industrial wire production capacity and optimized the regional allocation of the company's industrial wire production capacity. While enjoying Vietnam's tax policy, it can increase the penetration rate of the company's automotive products and create conditions for the company's future profit increase. In 2023, tire curtain cloth achieved revenue of 1,184 billion yuan (YoY +15.60%), output 63,500 tons (YoY +19.05%), sales volume 66,500 tons (YoY +25.66%), annual average price of 17,800 yuan/ton (-8.00% YoY), and gross profit margin of 24.30% (YoY -2.41 pct). According to the 2023 annual report, with the continuous advancement of customer certification and market development, the last production line of the company's high-performance tire curtain cloth technical improvement project was successfully launched. Currently, the company's curtain cloth production capacity has reached more than 60,000 tons; the company is seizing the opportunity of rising prosperity in the tire industry chain to drive curtain cloth production and sales to a new high through new product development, new customer certification, and the release of new production capacity; according to the “Notice on Implementing an Annual Output of 18,000 Tons of High-Performance Tire Curtain Cloth Project in Vietnam and Expansion of Production Base in Vietnam”, the company plans to invest about US$52 million to build an annual production capacity of 18,000 tons The high-performance tire cord cloth Vietnam (Phase I) project further improved the international production capacity layout and enhanced the company's core competitiveness.

The market expansion and product development of plastic products, stone plastic flooring and other businesses continue. In 2023, light box advertising materials achieved revenue of 525 million yuan (-6.04% YoY), industrial cloth materials achieved revenue of 274 million yuan (YoY +5.41%), PVC film achieved revenue of 283 million yuan (YoY +33.38%), stone plastic flooring achieved revenue of 300 million yuan (-7.75% YoY), and polyester chips achieved revenue of 398 million yuan (YoY -20.22%). In terms of plastic material products, according to the 2023 annual report, as the founder and pioneer of the domestic advertising materials industry, the company maintains a leading level of product market share and brand awareness; the high-end rolled film project with an annual output of 47,000 tons has completed equipment installation and commissioning on four of these production lines, and is expected to further expand its high-end market share after production; the company's photovoltaic reflective materials continue to advance in projects and market development for key customers at home and abroad; the company not only maintains stable profits in traditional businesses such as light box advertising materials and PVC films, but also maintains stable profits in traditional businesses such as environmentally friendly materials and new carbon reduction Frontier fields such as building materials are being actively expanded, and new industrial composite materials are expected to become one of the driving forces for the company's future performance.

In terms of plastic flooring products, according to the 2023 annual report, the company's new material PP flooring achieved the first successful development, batch shipment, and integration into the top overseas floor material supplier system; the stone plastic flooring project with an annual output of 12 million square meters has been put into operation, and the release of production capacity and the development of green and environmentally friendly new materials are expected to bring a wider market space for plastic flooring products.

valuations

Due to overcapacity and intense competition in the chemical fiber manufacturing industry where the company's chemical fiber products are located, profit forecasts are adjusted. The company's earnings per share are expected to be 0.35 yuan, 0.40 yuan, and 0.48 yuan respectively in 2024-2026, corresponding to PE of 12.2 times, 10.7 times, and 8.8 times, respectively. We are optimistic about the steady development of the company's main business and continued expansion of new products, and maintain the purchase rating.

The main risks faced by ratings

Risk of exchange rate fluctuations; risk of changes in raw material prices; increased risk of industry competition.