Incident: Luther Environmental released its 2023 Annual Report and 2024 Quarterly Report. In 2023, the company achieved operating income of 351 million yuan, +2.63% year over year; net profit to mother of 26.97 million yuan, +4.02% year over year; realized net profit without deduction of 20.46 million yuan, +2.30% year over year. Among them, 23Q4 achieved operating income of 119 million yuan, +6.49% year over year; net profit to mother of 610,000 yuan, -76.96% year over year; realized net profit without deduction of 1.43 million yuan, which changed from profit to loss year over year. 24Q1 achieved operating income of 67.95 million yuan, +21.90% year over year; net profit to mother of 5.67 million yuan, +54.15% year over year; realized net profit of 5.08 million yuan without return to mother, +88.16% year over year.
Comment:
Revenue performance in 23Q4 was steady, and profits declined due to credit impairment losses. On the revenue side, the company's liquor lees bio-fermented feed business, river and lake sludge treatment service Q4 achieved revenue of 57.35 million yuan, 43.79 million yuan, and 16.65 million yuan respectively. Among them, the sales volume of bio-fermented white wine lees Q4 reached 27,300 tons, +17.67% over the same period last year. On the profit side, despite excellent gross margin performance in Q4 in a single quarter, reaching 39.41%, with year-on-month increases, due to delays in payments in the river and lake sludge business, the company's accounts receivable collection period was extended, and increased credit impairment losses caused profits to decline.
24Q1 revenue grew rapidly, and profits increased due to a lower base. In 24Q1, the company's revenue side continued to grow. Among them, the liquor lees bio-fermented feed business, river and lake sludge treatment services achieved revenue of 50.33 million yuan, 7.49 million yuan and 3.4 million yuan respectively. Sales of bio-fermented white wine lees reached 24,500 tons, +66.30% over the same period last year. On the profit side, although gross margin declined slightly due to the drop in tonnage prices, profits still increased sharply year over year due to the low profit base last year.
Profit forecasting and investment ratings: Both sides of supply and marketing are improving to seize the company's growth opportunities. On the supply side, the company's production capacity in many places will be put into operation one after another this year, and feed production capacity will be greatly increased. On the sales side, the company drastically adjusted the personnel structure of the sales department and introduced new sales managers. It is expected that major customer sales breakthroughs will be achieved. Referring to the company's current business progress, we expect the company's 2024-2026 EPS to be 0.48/0.87/1.65 yuan, corresponding to the 2024-2026 33X/19X/10X PE respectively, maintaining the company's “buy” rating.
Risk factors: Production progress falls short of expectations, soybean meal prices fall short of expectations