Description of the event
The company released financial reports: In 2023, it achieved revenue of 1.14 billion yuan, a year-on-year decrease of 18%, attributed net profit of 170 million yuan, a year-on-year decrease of 36%, and a year-on-year decrease of 39% after deducting non-net profit. Corresponding to 2023Q4 revenue of 370 million yuan, a year-on-year increase of 52%, attributable net profit of 12 million yuan, a year-on-year decrease of 74%, and a year-on-year decrease of 93% after deducting non-net profit. 2024Q1 achieved revenue of 300 million yuan, an increase of 31% year on year, attributed net profit of 0.28 million yuan, a decrease of 50% year on year, and a decrease of 48% year on year after deducting non-net profit.
Incident comments
Wind power coatings will maintain their boom in 2023, and container paint prices will be under high pressure. The company's revenue for the full year of 2023 fell 18% year on year, including wind power growth and container decline. Wind power paint revenue in 2023 was about 510 million yuan, up 27% year on year. Sales volume is expected to increase year on year. Against the backdrop of the overall price reduction in the wind power industry chain, the unit price of wind power paint is expected to drop, but on the basis of a sharp drop in raw materials, the company's gross margin for wind power blades will still increase 6 percentage points to 46% year on year in 2023.
Container paint revenue was about 580 million yuan, down 38% year on year. Revenue fell 50% year on year in the first half of the year, and the decline narrowed to 26% in the second half of the year. However, the price of container paint gradually declined in 2023, especially in the second half of the year. The gross margin of container paint fell 23% in the first half of the year to about 13% in the second half of the year, eventually causing the overall gross margin of the company to drop rapidly. The overall gross margin of 2023Q1-4 was 37%, 36%, 29%, and 22% respectively. The company's expense ratio for the full year of 2023 was about 13.0%, up 0.8% year on year. Sales, management, R&D, and finance expenses rates were +1.4%, +0.4%, +0.03%, and -1.0%, respectively. The increase in sales expenses was related to the company's increase in marketing service fees. In the end, the company's net interest rate for the whole year was about 14.6%, a year-on-year decrease of 4.1pct. Profitability declined more rapidly in the fourth quarter, mainly due to the rapid decline in gross margin and the concentrated calculation of asset impairment losses and credit impairment losses in the fourth quarter of the fourth quarter. In the end, net interest rate attributable to the fourth quarter was about 3.2%, a year-on-year decrease of 15.0 pcts.
2024Q1 wind power paint sales fluctuated at a quarterly pace, container profits have yet to recover, and the first quarter results are under pressure. The company's revenue increased 31% in the first quarter. Referring to the pressure on the wind power blade industry chain in the first quarter, the company's wind turbine blade paint revenue is also expected to fluctuate greatly. Considering that wind power coatings are currently the main source of profit, net profit declined significantly year-on-year. The container coating industry has begun to recover. Sales are expected to grow rapidly year on year, but prices have not recovered significantly, and gross margin has not improved. Eventually, the company's overall gross margin fell from 37% to 20% (a decrease of 16.9 percentage points) in the first quarter, but due to the dilution of expenses (the rate fell 3.5 percentage points during the period), the net interest rate ended up being about 9.4%, down 15.1 percentage points year on year.
The container boom continues, and the pace of wind power is expected to make up, and attention is being paid to the growth of marine coatings. Looking ahead, 1) Containers: Expectations for global trade recovery+demand for replacement of used containers are expected to lead to a sharp rebound in demand in the container industry. Currently, there is still strong sustainability, and the container business is expected to start contributing to profit elasticity after subsequent price increases and revenue is realized. 2) Wind power sector: Installed capacity is expected to maintain steady growth throughout the year, the pace is expected to pick up after the second quarter, and wind power towers and overseas markets are expected to gradually expand. 3) Towards an industrial coating platform: The company has begun to enter the 30 billion yuan marine paint market from several billion yuan wind power and container coatings to the 30 billion yuan marine coatings market. Offshore coatings, energy storage tank coatings, and photovoltaic frame coatings are also expected to gradually expand, and growth in the medium term is worth looking forward to.
The estimated net profit for 2024-2025 is 250 million or 350 million yuan, corresponding to PE's valuation 16 or 11 times, and continues to be recommended.
Risk warning
1. The container industry is recovering slowly;
2. The installed capacity of wind power is lower than expected.