Incident: The company released its 2023 annual report and quarterly report. In 2023, it achieved revenue of 5.457 billion yuan, and realized net profit of 83 million yuan, or -63.66% year over year; of these, 23Q4 achieved revenue of 1,424 million yuan, +10.67%/-1.80% month-on-month, and realized net profit of 34 million yuan (-51.77% month-on-month). 24Q1 achieved revenue of 1,319 billion yuan, +11.90%/-7.35% YoY, net profit to mother of 51 million yuan (+51.23% YoY), and -15 billion yuan in the 23Q1 period.
In '23, weak demand compounded competition, and the profit space for the company's main products was compressed; in 24Q1, demand improved and superimposed category adjustments, and prices for major products turned into a repair trend. 23Q1-24Q1's gross sales margin was 6.85%/8.95%/10.53%/8.20%/9.83%, and the net sales margin was -1.33%/-0.43%/4.85%/2.38%/3.88%. By product: 1) The volume and price of the company's main products increased in 24Q1. Sales revenue of cloth/paper/film-based tape was +4.9%/-0.1%/+0.3% month-on-month, and 24Q1 sales unit price was +1.9%/+1.8%/+7.5% month-on-month. 2) The BOPP industry was intensively put into operation in '23, and supply and demand weakened. According to Longzhong News, the average price of 23Q1-24Q1 BOPP (East China thick light film) is 0.93/ 0.86/0.89/ 0.86 million yuan/ton. The company's BOPP film line production capacity has been steadily released. On the premise that the film is self-produced, the remaining production capacity is sold according to market demand. 24Q1 OPP film production was +107.9%/-18.5% month-on-month, and sales volume was -38.3%/-46.7% month-on-month.
Expand the range of categories and enhance the overall profitability of products. 1) The certification barrier for wire harness tape is high. The company has successfully passed the certification of many OEMs and established stable cooperative relationships in '23. It entered automotive wiring tape in '23, with revenue of 62 million yuan, +47.9% over the same period, with a gross margin of 16.23%, and is expected to expand further in '24. 2) Hot melt adhesives and other products (advertising consumables, stickers, etc.) have also achieved high revenue growth rates in '23. Revenue in '23 was +51.0%/+56.1% year-on-year, with gross margins of 4.2%/2.5%, respectively.
Investment advice: The expansion of the adhesive industry has slowed marginally, and the company is actively expanding its revenue scale and increasing the proportion of high-margin products. We forecast the company's revenue for 24-26 to be 62.40/67.01/6.923 billion yuan, net profit to mother of 214/2.70/319 million yuan, corresponding PE of 12.6/9.9/8.4 x, maintaining a “buy” rating.
Risk warning: Production capacity climbed lower than expected, demand fell short of expectations, raw material prices fluctuated greatly, etc.