Incident: The company released its 2024 quarterly report. 2024Q1 achieved revenue of 1,726 million yuan, +37% year-on-year, and net profit of 134 million yuan to mother, reversing year-on-year losses. The 2024Q1 gross profit margin was 13%, +9.5pct year on year, 7.8% net profit margin to mother, and +10.1pct year on year. The profit level improved significantly.
The main types of paper have shown steady performance, developed potential varieties, and broadened the product matrix. In mid-late March 2024, price increases for glassine paper and digital transfer paper were successfully implemented. The company has high-quality customer resources and a stable foundation in the field of food cardboard; drawing paper benefits from the expansion of downstream application scenarios from advanced packaging to 3C electronic products, and demand performance is good; epitaxial acquisitions have entered the field of industrial liners, and the product structure is gradually being enriched.
Raw material costs are strictly controlled, and the integration of pulp and paper is gradually being promoted. The cost of 2024Q1 pulp has increased slightly month-on-month. On the one hand, the company strictly controls the cost of wood pulp. On the other hand, along with the gradual rise in 300,000 tons of pulp production capacity, the proportion of food cards and homemade pulp used for cultural paper is increasing, and the integrated advantages of pulp and paper are expected to gradually become apparent. At the same time, in combination with the company's large-scale base construction and overall product structure layout, convenient transportation and self-supply of energy help save energy and logistics costs, superimposed product process improvements and improved operating efficiency, and there is room for improvement in gross margin.
Production capacity is gradually expanding, and the multi-base synergy effect is expected to gradually be realized. By the end of '23, the company had a production capacity of 1.4 million tons. The first phase of the Hubei base is expected to start trial production at the end of the first half of 2024, mainly producing corrugated box board paper, yarn tube paper, and specialty paper. A paper production line at the Jiangxi base is expected to be put into operation within 24 years. By the end of 2025, the Group's total production capacity is expected to double, and the synergy effects of the three major bases in Quzhou, Hukou and Hanchuan are expected to gradually be realized.
Various cost controls are effective. The 2024Q1 sales/management/ R&D/ finance cost ratios were 0.2%/1.4%/1.6%/1.7%, which was basically flat year-on-year/-0.2pct/+0.6pct/+0.3pct, respectively. Various cost controls were basically effective and remained low.
Profit forecast and rating: We are optimistic that the company's integrated pulp and paper layout is progressing steadily, new production capacity continues to be released, and the product structure is diversified. The company's net profit for 2024-2026 is estimated to be 550 million yuan, 710 million yuan, and 860 million yuan respectively. The corresponding PE is 11x/9x/7x, maintaining the “recommended” rating.
Risk warning: competition in the industry intensifies; demand for terminals falls short of expectations; fluctuations in raw material prices, etc.