Incident: The company released its 2023 annual report and 2024 quarterly report. In 2023, it achieved operating income of 1.66 billion yuan, +2.3% year on year, and realized net profit of 38.13 million yuan, -74.8% year on year; 23Q4/24Q1 respectively achieved operating income of 39/340 million yuan, -7.1%/-9.9% year on year, net profit to mother - 7914/32.36 million yuan, and 24Q1 -2.7% year on year.
Sales have had a long impact on the company's overall performance, and products such as oil filters and green building insulation cotton have achieved breakthroughs: (1) In 2023, the clean air sector achieved revenue of 980 million yuan, -3.6% over the same period last year. Among them, low demand for filter materials led to a sharp drop in volume and price, achieving revenue of 420 million yuan, -13.8%. The company sold 70% of Youyuan Environmental's shares in October 23, and clean air equipment achieved revenue of 420 million yuan, or -2.8%; the company vigorously expanded new applications, and oil filtration products obtained good profits, and achieved revenue of 75.58 million yuan, +238% year over year; (2) The energy efficiency sector achieved revenue of 650 million yuan, +13.3% year over year. Among them, VIP board and core materials were affected by falling demand and achieved revenue of 160 million yuan, -12.9%; in 2023, the production capacity of the company's 50,000 tons of high-performance ultra-fine glass fiber wool project climbed one after another, and glass wool achieved external revenue of 280 million yuan, +23.2%; in new applications, green building insulation cotton and VIP film contributed greatly to revenue growth, and VIP film materials achieved revenue of 41.99 million yuan; (3) The decline in 24Q1 performance was mainly affected by a long period of no merger. After deducting Youyuan's contribution, 24Q1 revenue/net profit ratio +15.1%/+6.5% respectively.
Multiple factors such as falling product prices, rising energy costs, and one-time credit impairment losses have put pressure on the company's 23Q4 net interest rate level. 24Q1 has returned to a reasonable level: (1) In 2023, the company achieved a comprehensive gross profit margin of 21.9%, -3.9 pct year on year. Among them, the gross margin of the clean air/energy efficiency sector was -0.9/-7.9pct year on year, mainly due to the phased decline in prices of Q4 glass wool and downstream products, and the rise in energy prices; the gross margin of the 24Q1 comprehensive company was 21.2%, month-on-month 23Q4 increased by 8.4 pct; (2) 2023 sales/management/R&D/finance expense rates were 3.3%/6.8%/5.5%/1.2%, respectively, -0.3/-0.5/-1.1/+1.1pct, respectively. Financial expenses increased by 965.4% compared to 2022, mainly due to partial conversion of convertible bond raising projects and an increase in the amount of corresponding interest fee; (3) The loss of credit impairment in 2023 was 30.84 million yuan, with an increase of 3.57 million yuan over the previous year, mainly due to the fact that Hou Yuen no longer merged with the statement later Accrued impairment losses such as receipts and dividends increased, and are expected to be recovered in 24-25; (4) The net sales margin in 2023 was 2.8%, -6.7pct year on year, of which Q1-Q4 was 9.5%/11.9%/8.9%/-20.9%, respectively; 24Q1 achieved a net sales margin of 10.0%, returning to the same period last year.
The increase in the scale of bill settlement affected the company's cash flow level, and the balance ratio improved: (1) The company's net cash flow from operating activities in 2023 was 1.66 million yuan, a sharp drop of 99.4% year on year, mainly due to an increase in the share of company customers that settled in the form of notes, and the balance of the company's notes receivable as of the end of 2023 was 190 million yuan, +352.8% year on year; (2) The company's cash payments for the purchase and construction of fixed assets, intangible assets and other long-term assets in 2023 was 59.58 million yuan, a year-on-year decline. 38.2%; as of the end of 2023, the company's balance ratio was 26.8%, down 7.7pct year-on-year.
The project to sell 70% of Suzhou Youyuan's shares has been completed, and the new medium- to long-term categories are expected to be released: the company's sale of 70% of Suzhou Youyuan's wholly-owned subsidiary to MANN+HUMMEL was completed at the end of October 23. Although the short term will have an impact on the company's revenue scale, the sale of equipment business with low gross margin and a long repayment cycle can help improve the company's profit margin and cash level; the company's cooperation with MANN+HUMMEL helps the clean air business expand across industries and globally, in addition to new application business sectors such as green buildings, home appliances, dust-free air conditioning, and high-end pharmaceutical cold chain insulation Development also helps the company's performance open up space for medium- to long-term growth.
Profit forecast and investment rating: The company is a leader in the filter materials segment in China. The mid-term operating bottom is rising, and new products such as building insulation and dust-free air conditioning are gradually entering the release period. Cooperation with MANN+HUMMEL is expected to accelerate the extension and global layout of core materials to automotive and other fields. High-end pharmaceutical cold chain insulation is expected to contribute new growth points in the medium to long term, and the company is expected to start a new round of rapid growth. Considering the short-term impact of Youyuan's sale, we adjusted the company's net profit from 2024-2025 to 120,000,000 yuan (previous value: 23/30 million yuan), adding a 2026 forecast of 190 million yuan. The closing price on April 25 corresponds to a 24-26 price-earnings ratio of 25/21/17 times, maintaining the “increase” rating.
Risk warning: The risk of new products and new fields falling short of expectations, and the risk of rising energy costs.