The company released its 2023 annual report and 2024 quarterly report
24Q1 revenue of 6.67 billion yuan, +5.0% year on year; net profit to mother of 39.06 million, +111.5% year on year, -85.7% month on month; net profit without return to mother - 15.48 million;
23Q4 revenue of $8.02 billion, -6.4% YoY; net profit of $270 million, +111.8% YoY, +76.2% month-on-month; net profit without return to mother of 60.41 million, +102.6% YoY, -22.0%; 23-year revenue of 29.33 billion, YoY -13.8%; Net profit of 160 million yuan, +106.9% YoY; net profit without return to mother - $30 billion.
In '23, the company plans to pay a dividend of 47.52 million yuan, with a dividend ratio of 30.4%.
Papermaking: Production capacity exceeds 800wt, H2 profit is expected to improve
Paper revenue in '23 was 19.24 billion, -11.8% year on year, gross profit margin 7.5%, +1.4pct year on year, of which volume/price difference was +10.0%/-19.8%;
Paper prices continued to decline in 23Q1. Expenses rose due to the company's shutdown and production reduction, and gross margin declined year-on-year; since 23Q2, it has turned a loss into a profit, mainly benefiting from the increase in the prosperity of the paper industry. In addition, the company adopted a management policy of lean management, cost reduction and efficiency, and inventory optimization. Downstream demand is weak in the traditional off-season in 24Q1. Since the beginning of the year, the market price of boxboard/corrugated paper has decreased by 3%/4%, respectively, and the company's profit margin has weakened; it is expected that the second half of the year will be accompanied by a recovery in demand and profits will improve.
In terms of production capacity, with the completion and commissioning of the Zhejiang Shanying 770,000 ton paper project and the Jilin Shanying Phase I 300,000 ton corrugated paper project, the company has developed a layout advantage of over 8 million tons in the core regions of East China, South China, and Central China, ranking second in the industry in scale. After the completion of the 1.8 million ton production capacity of the Suzhou base of the project under construction in the future, it will eventually push the company to complete the strategic production capacity layout of nearly 10 million tons and lay a solid industrial foundation for the company's future sustainable growth.
Packaging: optimization of customer structure and improvement of profitability
Packaging revenue in '23 was 7.08 billion, -7.8% year-on-year, gross profit margin 13.4%, +2.7pct year-on-year, with volume/price differences of -3.3%/-4.7%;
The company continues to expand the share of high-potential customers in various industries, developing orders from major customers in the daily chemical, FMCG, food and other industries. In 23, the share of sales orders increased to 42% year-on-year +9pct, driving an increase in profitability; in addition, it closely followed the delivery of major customers such as 3C, home appliances, and photovoltaics in 23, and the construction of a second-tier factory in Thailand to further enhance horizontal service capabilities.
Optimize fund management and resource allocation, and cash flow is expected to increase
The company has now been introduced by strategic investors from the two major paper manufacturing bases in Guangdong and central China, with an equity financing amount of 1 billion yuan, further exploiting the combined role of investment and loan and optimizing the debt structure; in addition, it has continued to promote the sale of shares in the Nordic paper industry and focus on the development of the core industry chain for 24 years.
Net operating cash flow for '23/24Q1 was $3.17 billion/ $4.6 billion, compared to +3 billion/+1 billion. Along with the recovery of the main business during the peak season, the pressure on cash flow is expected to ease further.
Adjust profit forecasts to maintain “buy” ratings
The company issued a long-term incentive management plan for 24-26 binding core personnel. According to the 23-year report and the quarterly report for '24, we adjusted the profit forecast. Furthermore, the main papermaking industry is expected to recover in the second half of the year, the new production capacity continues to rise, and the packaging sector continues to innovate service models based on the synergy of the industrial chain. We expect profits to increase steadily. The net profit for 24-26 is 7.7/10.5/1.26 billion yuan (24-25 years ago, respectively), and PE is 10/8/6X, respectively.
As of April 26, 2024, Sun Paper (12X) and Nine Dragons Paper (18X) were selected as comparable companies. The average PE valuation for 24 years was 15X, maintaining Shanying International's “buy” rating.
Risk warning: Downstream demand recovery falls short of expectations, new production capacity falls short of expectations, debt repayment risks, etc.