The company released its annual report for the year 23 and the quarterly report for the year 24

24Q1 revenue was 2.2 billion yuan, up 20%; net profit to mother was 270 million, up 120%; 23A company's revenue was 8.6 billion yuan, up 11%; net profit attributable to mother was 660 million, down 7%; net profit from non-return to mother was 600 million yuan, up 7%; of these, 23Q4 revenue was 2.3 billion, up 5%, and net profit attributable to mother was 280 million, up 97%.

The company plans to distribute a cash dividend of 250 million yuan (tax included) in 2023, with a dividend rate of 37%; the company's fund-raising project, the 300,000 ton food card machine (Changshan PM10), was officially put into operation in April 2023. In 2023, the total production period was over 7 months, with an output of 119,700 tons and a sales volume of 105,700 tons. The market for this product is relatively competitive, and the price is close to the historical bottom. Due to its leadership in product quality, the company has adjusted product sales prices, and the overall price trend of raw materials is stable; in 2024, the production line will start using the company's own pulp to reduce costs. At the same time, the company's coated cardboard products will also gradually be launched and met with the market, which will have a positive impact on product gross profit and overall profit.

By product, the daily consumption series revenue in '23 was 4.1 billion, an increase of 15%, gross profit margin of 11%, and an increase of 1 pct; sales volume of 470,000 tons was increased by 19%;

Food and medical packaging materials series revenue was 1.7 billion, up 15%, gross profit margin 7%, down 5 pct; sales volume was 230,000 tons, up 49%

Revenue from the business exchange and publishing printed materials series was 710,000 million, down 8%, gross profit margin 14%, up 2 pcts; sales volume of 100,000 tons, down 3%

Tobacco industry supporting series 800 million, same increase of 0.8%, gross profit margin 16%, same increase of 1 pct; sales volume of 90,000 tons, same increase of 0%

The revenue of the electrical and industrial materials series was 700 million, an increase of 18%, and the gross profit margin was 14%, a decrease of 0.05 pct; sales volume was 60,000 tons, an increase of 22%;

In 2023, Xianhe sold 970,000 tons in total, an increase of 20% over the same period.

By region, domestic revenue in '23 was 7.5 billion, up 11%; gross profit margin was 11%, down 0.7 pct; overseas 570 million, down 5%, gross profit margin 20%, same increase of 8 pcts.

The company's 24Q1 gross profit margin was 18%, an increase of 8 pcts, a net profit margin of 12.3%, and a year-on-year increase of 5.6 pcts.

Actual controllers increased their holdings by 30 to 40 million, demonstrating business confidence

The company announced that one of the actual controllers, Mr. Wang Minwen (24.5% indirect shareholding), intends to use his own capital to increase his A-share holdings within 6 months from May 9, 2024, with a cumulative increase of RMB 30-50 million, demonstrating confidence in the company's future development and recognition of the company's long-term investment value.

Give full play to our resource advantages and make full preparations to ensure the smooth commissioning of Guangxi and Hubei industrial parks.

The company invested 11.8 billion yuan in Guangxi's “Guangxi Sanjiangkou New Area High-Performance Paper-based New Material” integrated project with an annual output of 2.5 million tons and the first phase of the “High Performance Paper-based New Material Circular Economy” project with an annual output of 2.5 million tons in Shishou, Hubei, was nearing completion at the end of 23, and production and operation will gradually commence in 2024.

The completion of the two major projects in Xianhe is of great significance. They not only doubled the scale, but also improved the new layout of the domestic market for the company. The Hubei project achieved partial self-sufficiency in paper-based raw materials, built a high-end brand of new paper-based materials in the central region, and stabilized the company's leading position in the high-performance paper-based new materials industry. The first production line was put into trial operation in January '24.

The Guangxi project alleviates the bottleneck of relying entirely on imports for large raw materials, wood pulp, and realizes the “integrated use of forest pulp and paper” layout of the entire industry chain. A base camp has been set up for the company to operate in the southwest China market, and can be integrated into the Southeast Asian economic circle through the “Pearl River - Xijiang Economic Belt”; the first phase of the project will enter the trial operation stage in 24Q2 as planned.

Adapt to market demand, adjust production capacity layout, and rapidly expand market share The production of food packaging materials developed and produced by the company has gradually increased in recent years. Last year, production and sales of the food and medical packaging materials series grew rapidly, increasing 63.37% over the previous year, and the market investment volume will also be increased this year. The company's electrolytic capacitor paper, due to breakthroughs in key technologies, the rapid development of the NEV industry and the development of new products to replace imports, the annual sales volume of supporting materials for electrolytic capacitors increased by 12.35% over the same period. This year, the company will also continue to seize this hot topic, continue to improve the quality of electrolytic capacitor paper, and accelerate the development of new products to the market.

Update profit forecasts and maintain “buy” ratings

The common feature of the Hubei project and the Guangxi project is that it uses local resource advantages to seize resource highland and achieve an “integrated forest pulp and paper” industrial chain layout to make up for the shortcomings of upstream pulp production; it marks that the company's production capacity layout in southwest China and the Central Plains has been implemented. It also indicates that the company will continue to launch new production capacity into the market on a large scale in the future, and the market share is expected to increase by leaps and bounds again. In view of this, we expect the company's net profit to be 10.7/13.8/1.67 billion yuan in 24-26 years (the value was 1,09/1.38 billion yuan 24-25 years ago), and the corresponding PE is 13/10/8X, respectively.

Risk warning: risk of economic recovery falling short of expectations; risk of fluctuations in raw material prices; risk of project implementation