The company achieved total revenue of 3.142 billion yuan in 2023, an increase of 15.67% over the previous year; net profit of 121 million yuan/73 million yuan (loss of 165 million yuan/180 million yuan for the same period in '22); basic EPS was 0.57 yuan/share (-0.79 yuan/share for the same period in '22); and a weighted average ROE of 19.40% (-27.75% for the same period in '22).
The company achieved total operating income of 526 million yuan in the first quarter of 2024, a year-on-year decrease of 1.99%; net profit to mother was 12.2657 million yuan, up 50.98% year on year, net profit after deducting 10.677 million yuan, up 368.56% year on year; basic EPS was 0.056 yuan/share, up 43.59% year on year, and the weighted average ROE was 1.69%, up 0.15 pct year on year.
The architectural ceramics business bucked the trend, and the profit quality was steadily improving. In 2023, the company's revenue increased 15.67% year on year to 3.142 billion yuan, and net profit to mother turned a year-on-year loss into profit. By product, in 2023, with the exception of artificial leather business revenue of -13.06%, the rest of the company's business achieved positive growth; among them, the architectural ceramics business maintained a high growth rate, with revenue from outsourced products and homemade products +21.28%/+18.89% to 1,250 million yuan/320 million yuan, respectively; revenue from automotive interior finishing materials +15.49% to 487 million yuan; revenue from the low-base assembly business grew +143.76% year over year to 479.47 million yuan; film/building fire-resistant veneer materials/home decoration Revenue from finishing materials was +13.13%/+3.54%/+5.45% year-on-year to 408 million yuan/262 million yuan/252 million yuan, respectively. On a quarterly basis, Q1-Q4 2023 revenue was +8%/+12%/+21%/+19%, respectively, and net profit after deduction of non-backward mother in the single quarter was +302%/+72%/+2148%/+110%, respectively. Overall, revenue growth was stable, and profitability continued to recover. In 2024Q1, the company achieved total revenue of 526 million yuan, -1.99% year on year; net profit to mother was 12.2657 million yuan, +50.98% year over year, mainly benefiting from changes in product structure and an increase in sales of high-margin products.
Reduce costs, increase efficiency, increase profit margins, and maintain excellent cash flow. In 2023, the company's net sales margin/gross margin was 4.92%/22.43%, compared with +12.43pct/+1.75pct, with a significant improvement in profitability. Net sales margin/gross margin for 24Q1 was 2.45%/21.25%, respectively, +0.53pct/+0.24pct year-on-year. In terms of cost ratio, the cost ratio for the 2023 period was -1.19pct to 18.09%, of which sales/management/R&D/finance expenses were 7.26%/5.65%/3.79%/1.39%, respectively. All expenses decreased year-on-year; the 24Q1 company's expense ratio was -0.42pct to 18.79% year over year, and overall cost control was excellent. The company focuses on “cash is king”. Net operating cash flow inflows in 2023/24Q1 were 191 million yuan/11.2486 million yuan, respectively.
Consolidate the main business sector and lay out the complete industrial chain. (1) Home improvement business sector: Market demand in the domestic building ceramics industry has shrunk, pressure on the industry to remove inventory and production capacity has increased, and small and medium-sized ceramic construction enterprises have withdrawn at an accelerated pace.
Yingpai Company, which was acquired by the company in 2021, has a history of nearly 50 years. It is a famous brand of Chinese ceramics. It has a high position in the industry and strong market competitiveness. Through the OEM asset-light model, it has achieved contrarian growth in the ceramic industry in the process of removing production capacity, and its market share is expected to increase further. The company uses Yingpai Tiles and Tianhui Jianke's channel resources for home decoration and public decoration to drive sales of products such as architectural ceramics and polymer composite finishing materials. It has formed a three-dimensional collaborative organizational structure of “marketing the front desk, empowering the middle office, and supporting the back office”, and helps promote innovation in the complete pan-home furnishing business. (2) Automobile business sector: In 2023, China's automobile production and sales volume reached 30.16 million units and 3.09 million units respectively, up 11.6% and 12% year on year, reaching record highs. The company's automotive interior product competitiveness and market share are in a leading position in the automotive interior industry, and it is expected that it will continue to benefit from the boom in the automotive industry in the future.
Maintain an “overweight” investment rating. The company is based on two major businesses: architectural ceramics and polymer composite finishing materials, and focuses on the pan-home furnishing industry chain. The operating efficiency of Yingpai ceramic tiles has improved markedly, and Ruixin fireproof panels have helped open up the field of medical renovation. Considering the intensification of price competition in the ceramic tile and automotive interior industry, we slightly lowered our profit forecast. We expect the company's EPS to be 0.74 yuan and 0.95 yuan respectively in 2024-2025, and the corresponding PE will be 12.3x and 9.5x, respectively, maintaining an “incremental” investment rating.
Risk warning: The growth rate of real estate and infrastructure investment has declined sharply, the price of raw materials has risen sharply, the expansion of new business and new markets falls short of expectations, the risk of increased price competition in the ceramic tile industry, and the risk of impairment of goodwill in newly acquired assets.