The company released its 2024 quarterly report

24Q1 achieved revenue of 1.73 billion yuan, +37.2% year over year; net profit of 130 million yuan, +548.8% year over year; net profit without return to mother of 130 million, +1023.0% year on year. The obvious profit improvement was mainly due to 1) increase in product sales; 2) falling raw material prices and the company's promotion of cost reduction and efficiency.

Price increases have been implemented, cost advantages have been shown, and Q2 profit is expected to be steady

In April, the company's heat transfer and glassine price increase letter landed relatively smoothly, effectively transferring the rise in pulp prices; the 24Q1 300,000-ton slurry production line was put into operation, and it is still in the climbing stage, and the cost advantage is expected to gradually become apparent in the future.

Profitability improved year over year and cash flow improved

The 24Q1 company's gross profit margin was 13.0%, up 9.5pct; net profit margin was 7.8%, up 10.2pct, and 3.6pct; judging from cost performance, sales/management/ R&D/financial expenses were 374/2425/2737/29.95 million yuan, respectively, up 72%/24%/126%/69% respectively. Along with falling raw material prices and cost reduction and efficiency improvement on the management side, profitability improved significantly over the same period last year.

The 24Q1 net operating cash flow of the company was 170 million. The significant improvement was mainly due to increased collection of accounts receivable.

Industry pattern optimization, steady release of production capacity

The company's production capacity continued to increase in 2023: in addition to the 500,000 ton (PM10) food wrapping paper production capacity in Jiangxi, ① Zhejiang added a new digital transfer paper production line (PM5) with an annual output of 22,000 tons; ② Jiangxi added a drawing paper production line with an annual output of 18,000 tons (PM17); ③ the basic construction of the 300,000 ton chemical pulp production line in Jiangxi was completed at the end of 2023; ④ At the end of the third quarter, it added 35,000 tons of industrial liner production capacity through the acquisition of Wuzhou Special Paper (Longyou) Company, which increased the market share of advantageous products and reduced the cost of raw materials by 35,000 tons. Significance.

The company's new production capacity is expected to be implemented in 2024: the first phase of the 4.49 million ton pulp and paper integration project at the Hubei base is progressing smoothly. It is expected that commissioning will begin at the end of May and production by the end of June; the Jiangxi base has planned a tissue paper production line. By the end of 2025, including the production capacity of the first phase of the Hubei base, the Group's total production capacity is expected to double. Quzhou, Hukou and Hanchuan are developing collaboratively, utilizing their resource advantages in complementary ways, and the product structure is more scientific and reasonable, effectively smoothing the risk of market fluctuations.

Maintain profit forecasts and maintain “buy” ratings

The company is one of the largest domestic specialty paper R&D and production enterprises. The scale of production capacity is steadily increasing, and the integrated results of pulp and paper are beginning to show. We expect net profit to be 5.6/72/850 million yuan for 24-26, respectively, and 11/9/7X for PE, respectively.

Risk warning: raw material costs are rising; new production capacity investment falls short of expectations; downstream demand recovery falls short of expectations; industry competition intensifies, etc.