Incident: Baosteel Packaging released its 2023 annual report and 2024 quarterly report. In 2023, the company achieved operating income of 7.760 billion yuan, a year-on-year decrease of 9.16%; net profit to mother was 219 million yuan, a year-on-year decrease of 18.58%; net profit after deduction was 216 million yuan, a year-on-year decrease of 14.66%.
Among them, in the 23Q4 quarter, the company achieved operating income of 1,944 billion yuan, a year-on-year decrease of 16.49%; net profit to mother of 0.16 million yuan, a year-on-year decrease of 71.39%; and net profit after deduction of 12 million yuan, a year-on-year decrease of 76.43%.
2024Q1 achieved operating income of 1,982 million yuan, a year-on-year increase of 12.65%; net profit to mother was 56 million yuan, a year-on-year decrease of 8.92%; net profit after deducting net income of 52 million yuan, a year-on-year decrease of 10.48%.
Downstream demand is under pressure in the short term, and overseas market layout continues to advance
Facing the serious challenges of a slowdown in downstream demand growth and large market fluctuations, the company continuously optimizes its market business layout. By product, in '23, the company achieved revenue of 7261/483 billion yuan for metal beverage cans/packaging, respectively, an increase of -5.83%/-40.04% over the previous year. 1) In terms of metal beverage cans, sales rose slightly, up 2.56% year on year to 14.771 billion cans, and the average price fell 8.1% year on year to 0.49 yuan/can. 2) In terms of packaged color printing iron, the company's packaged color printing iron production fell 28.46% year on year in '23, and sales fell 28.21% year on year, mainly due to a slowdown in downstream market demand for packaged color printed iron. By region, the company achieved overseas and domestic revenue of 58.54/1.89 billion yuan respectively in '23, an increase of -13.57%/8.46% over the previous year. In '23, the company actively expanded overseas markets, actively promoted the construction and operation of new construction projects such as Cambodia and Vietnam, and consolidated its strategic layout and market position in the Southeast Asia region.
Profitability is relatively stable, and the control of expenses during the period is reasonable
In terms of profitability, the company's gross margin in 2023 was 9.02%, up 0.99pct year on year. Among them, 23Q4 gross margin was 7.67%, up 0.27pct year on year. In 24Q1, the company's gross margin was 8.38%, down 0.43pct year over year.
In terms of period expenses, the company's expenses rate for the 2023 period was 4.23%, up 0.64pct year on year; sales/management/R&D/finance expenses were 1.12%/2.80%/0.08%/0.22%, respectively, up 0.27/0.48/-0.09/-0.02pct year-on-year, respectively. The company's expense ratio decreased by 0.55pct year-on-year to 4.43% during the 24Q1 period. Under the combined influence, the company's net interest rate in 2023 was 3.13%, down 0.15pct year on year; among them, 23Q4 net interest rate was 1.25%, down 1.26pct year on year.
In 24Q1, the company's net margin was 3.11%, up 0.56pct year-on-year. Downstream demand for metal beverage cans fluctuates greatly depending on the season. For example, beer etc. will usher in a peak season in summer, which is expected to drive up future sales.
Investment advice: As a leading metal packaging enterprise, the company continues to optimize the product structure and production capacity layout, and is expected to maintain steady growth along with industry pattern optimization performance. We expect Baosteel Packaging's 2024-2026 revenue to be 86.00, 96.10, and 10.727 billion yuan, up 10.82%, 11.62% year on year; net profit to mother will be 2.64, 3.04, and 347 million yuan, up 20.70%, 15.35%, and 14.09% year on year, corresponding PE of 23.5x, 20.4x, 17.8x, giving 271xPE 2024, target price 6.30 yuan, maintaining the investment rating of increased holdings -A.
Risk warning: risk of downstream demand falling short of expectations; risk of fluctuating raw material prices; risk of repeated epidemics; risk of reduced orders from major customers.