Incident: The company disclosed its 23 annual report and 24 quarterly report. The revenue side growth rate was positive starting in 23Q4, and the growth rate was beautiful under the low base of 24Q1. The company achieved operating income of 15.223 billion yuan, -6.96% year on year; realized net profit of 1,438 billion yuan, -3.35% year on year; net profit after deduction of 1,494 billion yuan, -1.4% year on year. Among them, 23Q4 achieved operating income of 4.416 billion yuan, +2.1% year on year; realized net profit of 453 million yuan, -3.44% year over year; net profit after deduction of 458 million yuan, +4.54% year on year. 24Q1 achieved operating income of 3.476 billion yuan, +19.37% year over year; realized net profit of 219 million yuan, +20.55% year over year; net profit after deduction of 243 million yuan, +54.32% year over year.
The layout continues to improve, and overseas revenue has increased significantly. By product, revenue from fine paper packaging, packaging ancillary products, environmentally friendly paper and plastic products, and other products in '23 was 11.036 billion yuan, 2,614 billion yuan, 1,064 million yuan, and 182 million yuan, respectively, -6.58%, -7.89%, -4.73%, and -23.69% year-on-year respectively. Looking at the subregions, domestic and foreign revenue in '23 were 114.97 billion yuan and 37.26 billion yuan respectively, -12.45% and +15.35% year-on-year respectively. In '23, the company's new plant in Malaysia passed customer certification and was successfully put into operation. The construction of a new eco-friendly packaging plant in Vietnam was completed and successfully put into operation. The commissioning of the new plant drove a marked increase in overseas revenue. By customer, the top five customers accounted for 37.46% of total revenue in the first half of 2023. Among them, the largest customer had revenue of 2.401 billion yuan, -8.8% year-on-year, accounting for 15.77% of revenue.
Overall profitability improved steadily, and expenses were well controlled during the period. 1) Profitability: The company's gross margin was +2.48pp to 26.23% year on year; net margin +0.18pp to 9.82% year over year. 24Q1 gross margin -1.63pp to 22.09% yoy; net sales margin +0.31pp to 6.45% yoy. 2) Period expense ratio: Expense rate +2.01pp to 13.87% year over year; of these, sales expense ratio +0.27pp to 2.74%; management expense ratio +1.4pp to 10.94% yoy; R&D expense ratio +0.47pp to 4.57% yoy; financial expense ratio +0.34pp to 0.18% yoy. The cost ratio for the 24Q1 period was -3.06pp to 13.89%; among them, the sales expense ratio was +0.15pp to 2.7%; the management expense ratio was -0.65pp to 11.48%; the R&D expense ratio was -0.52pp to 4.61% year over year; and the financial expense ratio was -2.57pp to -0.3% year over year;
Cash flow performance was excellent, and there was a slight decline in accounts receivable turnover. In terms of cash flow, operating cash flow of 3.673 billion yuan was achieved in '23, +40.17% year-on-year; the ratio of operating cash flow/net income from operating activities was 209.99%. 24Q1 achieved operating cash flow of 798 million yuan, or -23.14% year over year; operating cash flow/net income ratio from operating activities was 291.4%. In terms of operational efficiency, the number of inventory turnover days in 23 was 54.27 days, up 3.12 days year on year; accounts receivable turnover days was 139.07 days, up 10.76 days year on year.
The construction of intelligent chemical plants is progressing rapidly. In '23, the company basically completed the construction of benchmark smart factories in major regions in China, and launched the first smart factory overseas. Within China, construction of Suzhou Yutong Smart Factory, Hunan Yutong Smart Factory, and Chengdu Yutong Smart Factory Phase I was completed; construction of Jiujiang Yutong Smart Factory Phase I and Longgang Yutong Smart Factory Phase I was underway; and construction of the Kunshan Yutong Intelligent Warehousing and Logistics System started. In the same period, intelligent construction in other regions such as Luzhou Yutong, Chongqing Yutong, Yantai Yutong, and Haikou Yutong continued to be planned and promoted. Overseas, the first phase of construction of Vietnam's smart factory has started.
Investment advice: The company's overseas layout continues to improve, and cigarette packs, environmentally friendly packaging, etc. are expected to contribute to stronger growth drivers. As the construction of intelligent chemical plants progresses, manufacturing advantages are expected to continue to expand. The company's net profit for 2024-2026 is estimated to be 1,697, 19.85, and 2.03 billion yuan, respectively (values before 24-25 were 20.50 billion yuan and 2,401 billion yuan, adjusted according to the company's 23 and 24Q1 results), corresponding PE is 15, 13, and 11 times, maintaining a “buy” rating.
Risk warning: Downstream demand recovery falls short of expectations, fluctuating raw material costs, new customer expansion falls short of expectations, etc.