Key points of investment
Yongxin Co., Ltd. released its 2024 quarterly report
The 24Q1 company achieved revenue of 835 million (+6% YoY), net profit of 86 million yuan (YoY +11%), net profit after deduction of 81 million (YoY +6%), revenue growth improved month-on-month in 23Q4 (-2%), and achieved steady growth in the same period last year.
The non-recurring profit and loss in 24Q1 was 400+ million more than in 23Q1 (mainly the profit and loss of investing or managing assets by entrusting others to invest or manage), and profitability is steady.
Revenue side: Orders in the downstream color printing docking sector are stable, and film production capacity is released 1) The company's main downstream color printing business mainly cooperated with high-quality customers in the food, daily chemicals, and pharmaceuticals fields for a long time, while production capacity was steadily expanding. We expect 24Q1 to have steady orders for the main color printing business.
2) The film business grew faster ($525 million in 2023, +14.5% year over year, of which 23H2 +30% year over year). Thanks to the gradual commissioning of the 33,000-ton BOPE project, the project progress reached 60% by 23H1 and 100% by the end of 23. Self-use of BOPE film can effectively solve the problems of non-environmental protection and non-recyclability caused by previous PE/PP blending, reduce the company's outsourcing ratio and further enhance the profitability of the main business.
Expansion of color printing production capacity paves the way for order growth
In March, the company announced the construction of the “Smart Factory Project with an Annual Output of 40,000 Tons of Color Printing Composite Flexible Packaging Materials” to supplement the production capacity of the main business color printing. The construction period of the project is estimated to be 445 million yuan (107 million in infrastructure + 338 million in equipment & other investments). After deducting the impact of relocation equipment production capacity, the consolidated calculation added net annual revenue of 629 million yuan and annual profit of 100 million yuan to ensure steady growth.
Profit side: Crude oil prices rose in Q1, with significant fee control results 1) The gross margin for 24Q1 was 22.06% (-2.35pct year on year). We expect the price of raw materials to rise, and the settlement price of Brent crude oil futures was 75.9 US dollars/barrel at the beginning of '24, and 3.28 rose to 87.5 US dollars/barrel, an increase of 15% during the period.
2) The company actively carried out product innovation, cost reduction and efficiency, and product structure optimization. The total cost rate during the 24Q1 period was -0.57pct year on year, with management+R&D expenses falling a lot (-0.38pct year over year).
Profit forecasting and valuation
The soft plastic packaging industry continues to clear and Yongxin's share to rise. At the same time, the product structure is optimized and profitability is enhanced. It is a high-quality target for high dividends and steady growth, and continues to be recommended. We expect the company to achieve operating income of 3,796 billion/ 4.238 billion/ 4.703 billion yuan in 2024-2026, an increase of 12.34%/11.64%/10.99% respectively, and net profit to mother of 476 million/538 million/600 million yuan, an increase of 16.78%/13.00%/11.46% respectively, corresponding to the current PE13/11.5/10.32X rating.
Risk warning: Crude oil prices have risen sharply, and thin film development falls short of expectations