The second curve is growing rapidly and profitable. It continues to have a high dividend ratio, maintaining the 2023 “buy” rating of revenue/net profit to mother of 27/186 million yuan, yoy +35.81%/+23.74%, 2024Q1 revenue/net profit to mother of 597/35 million yuan, yoy +28.6%/+22.0%, and the proposed cash dividend ratio of 94% in 2023. Considering equity incentive fees, we lowered 2024-2025 and added a profit forecast for 2026. The net profit for 2024-2026 is estimated to be 2.7/3.4/40 billion yuan (originally 29/350 million yuan), the corresponding EPS is 0.9/1.2/140 million yuan, and the current stock price corresponds to PE 13.2/10.5/9.0 times. The company firmly believes in a one-stop cowhide material supplier strategy, and the main business benefits from domestic demand recovery and export sales development & new automotive interior models and refinements to support rapid development & Baotai's revenue maintenance Growth momentum, equity incentive targets demonstrate confidence, and maintain a “buy” rating.
Main business: Deeply cultivate the domestic market, increase investment in Indonesian production capacity to seize supporting opportunities in the industrial chain. In 2023, cowhide sales increased +31.6%, volume +14.3% /price +15.2%. The parent company's 2023 revenue was 1,457 million yuan (+5.6%), gross profit margin 20.4% (+0.6pct), net profit of 134 million yuan (-10.8%), and a net profit margin of 9.2%. 2024Q1 has revenue of 297 million yuan (+10.34%), net profit of 0.2 billion yuan (-22.5%), gross profit margin of 18.65% (+0.41pct). The main business is deeply involved in the domestic market while expanding production in overseas markets: (1) Gradual expansion of leather used in other fields: 2023 revenue of 0.7 billion yuan (+133.15%), accounting for 2.6%, accounting for +1.09pct, and gross margin increased significantly to 18% (+10.9pct). (2) Expanding Indonesian production capacity for a global layout: Entering the VF and COLEHAAN supply chains in 2023, and 2024Q1 entering the Adidas supply chain. The main export business accounts for double digits in 2023. The main export business is expected to grow faster than domestic sales in 2024.
Automotive interior leather has performed well, and profitability is better than expected. Baotai's growth momentum is expected to continue Hongxing/Baotai's 2023 revenue of 6.06/489 million yuan (+48.7%/+125%), net profit of 0.88/ 013 million yuan (+192%/+69%), and a net interest rate of 16.3%/2.7%. 2024Q1 revenue was RMB1.53/135 million, +38.8%/+98.5% YoY, and net profit of 2469/2406 million yuan, +60%/+106% YoY. (1) Hongxing's sharp increase in profit is mainly due to increased gross margin, cost reduction and efficiency, and tax rates. Revenue is expected to increase by 30% + to 800 million yuan in 2024, driven by ideal L6 and modified models. (2) Baotai expects to maintain its growth momentum in 2024.
Gross margin improved year-on-year in 2023. The increase in the cost ratio during the period was mainly due to the gross margin ratio of main business investment and equity incentive expenses: the gross margin for 2023 and 2024Q1 was 21.41% (+1.90pct), 20.24% (+2.48pct); the cost side: +0.5/+0.62pct during the 2023 and 2024Q1 period, the increase was mainly due to an increase in equity incentive expenses, and a reduction in financial income from 2024Q1. 2024Q1 Sales/Management/R&D/Finance Expense Ratio +0.12/+0.33/-0.08/+0.24pct. Net profit margin for 2023 and 2024Q1 was 6.9% (-0.67pct) and 5.8% (-0.31pct). Operating capacity:
Net cash flow from operating activities in 2023 was $0.25 billion (+122.69%). As of 2024Q1, the number of inventory turnover days was 237 days (+45 days compared to the previous month), and the number of accounts receivable turnover days was 65 days (+8 days).
Risk warning: Automotive leather orders and capacity expansion fell short of expectations, and raw material prices fluctuated greatly.