The company released its 2023 annual report and 2024 quarterly report: 1) 2023: The company achieved revenue of 18.693 billion yuan (YoY +1.8%), net profit to mother of 182 million yuan (-20.3% YoY), net profit of 121 million yuan (YoY -45.4%); of these, Q4 achieved revenue of 5,015 million yuan (YoY +11.1%), net profit to mother of 275 million yuan (+171.4% YoY); 2) 2024Q1: The company achieved revenue of 4.398 billion yuan (+5.7% YoY), net profit attributable to mother of 101 million yuan (YoY +120.2%), and net profit of non-attributable net profit of 95 million yuan (YoY +117.3%). The overall demand structure is divided, and the company's industrial chain is extended. Compared with the industry, the comparative advantage of the industry is remarkable, and profits remain steady.
Supply and demand pressure remains, cost pressure is rising, and profits are under month-on-month pressure. In 2023, the company's revenue of whiteboard/cultural paper/ box board paper was 11.941 billion yuan/4.245 billion yuan/1,832 billion yuan (-8.9%/+105.9%/-11.2%, respectively), and gross profit per ton was 466/633/178 yuan (-41.1%/+62.4%, respectively).
According to Zhuochuang information, in 2023Q4/2024Q1 the price of softwood pulp was +7.2%/-2.0% month-on-month, and the price of broadleaf pulp was +24.0%/-2.3% month-on-month, and pulp gradually entered the price increase channel. On the demand side, demand for white cardboard was divided and gradually recovered, but supply pressure remained. According to Zhuochuang information, the average price of 2023Q4/2024Q1 white card paper market was 4897/4762 yuan/ton (+11.8%/-2.8% month-on-month); demand for double adhesive paper was stable, and the overall price of 2023Q4/2024Q1 double adhesive paper was 6114/5786 yuan/ton (+10.0%/-5.4% month-on-month).
The gross margin of the 2023Q4/2024Q1 company was 17.1%/13.3% (+1.3pct/-3.8pct month-on-month), respectively, and the net profit margin was 5.5%/2.3% (+0.4pct/-3.2pct month-on-month), and profit was under pressure month-on-month.
The product structure is optimized, and the pace of production expansion is steady. In terms of products, the company is actively expanding the product line with high added value and high technical barriers, promoting the continuous rise in production of differentiated products such as liquid packs, cigarette packs, food cards, copper cards, high-grade office paper, coated paper, and coated paper, while developing new types of paper such as coated cow cards, natural colored paper cups without water or corona, high-end dinner plate card paper, eye protection paper, Oriental book paper, and pure paper. In terms of raw materials, make full use of the “integrated forest pulp and paper” raw material advantages of major shareholders to develop and apply new main and auxiliary materials to mitigate the risk of fluctuations in the cost of bulk raw materials such as wood pulp and wood chips; increase the proportion of domestic applications of local wood chip resources such as poplar wood and pine wood to reduce costs. In terms of production capacity, the company continues to break through the OEE bottleneck with an annual output of 450,000 tons of high-grade information paper machines to achieve a steady climb in production capacity; actively promotes 800,000 tons of high-grade special cardboard expansion projects, focusing on products such as all-wood pulp zero-plastic paper cup paper, high-end social card paper, and high-end cigarette card paper.
The cash flow performance was impressive, and the operating capacity was improved. In 2023, the company's operating cash flow was 2.119 billion yuan (year-on-year +1.939 billion yuan); 2024Q1 was 450 million yuan (year-on-year +293 million yuan), with excellent cash flow performance. In terms of operating capacity, as of the end of 2024Q1, the number of inventory turnover days of the company was 68.31 days (-5.42 days year on year), the number of accounts receivable turnover days was 21.24 days (+4.66 days year over year), and the number of accounts payable turnover days was 48.10 days (-34.35 days year on year).
Profit forecasting and investment rating: The company's product structure is continuously optimized, and the majority shareholders are empowered in multiple dimensions. We expect net profit due to mother for 2024-2026 to be 60 billion yuan, 1.02 billion yuan, and 1.28 billion yuan respectively. The corresponding PE is 12.8X, 7.5X, and 6.0X, respectively, maintaining a “buy” rating.
Risk warning: Economic recovery falls short of expectations, industry competition intensifies, and production capacity investment falls short of expectations.