Matters:
The company announced its 2023 annual report and 2024 quarterly report. In 2023, the company achieved revenue/net profit attributable to mother/net profit excluding non-attributable net profit of RMB 17.4/1.7/160 million, YoY +8.0%/+0.4%/+19.9%. 24Q1 The company achieved revenue/net profit attributable to mothers/net profit excluding non-attributable net profit of RMB 4.4/0.5/0.4 billion, YoY +1.0%/+25.6%/+6.5%.
Commentary:
The growth rate of liquid milk packaging has slowed, and non-carbonated beverage packaging has performed well. By category, in '23, the company achieved revenue of 1,69/40 billion yuan for sterile liquid milk/non-carbonated soft drink aseptic packaging, respectively, or +7.5%/+45.3% year-on-year (+30.9%/-14.9% growth rate over the same period). Among them, the slowdown in the growth rate of liquid milk packaging was mainly due to a 4.1% year-on-year increase in sales of Yili, a major customer. During the period, the company was deeply tied to well-known non-carbonated soft drink manufacturers such as Wang Laoji, Coconut, Gadobo, and Weiwei Group, and revenue continued to grow rapidly. On the sales side, the company achieved a total sales volume of 12.26 billion packs of packaging materials in '23, +6.8%; according to Ipsos data, the company accounted for 10.5% of the sales volume of the aseptic packaging market in China and 13.4% of the sales share of aseptic packaging suppliers in the Chinese liquid milk market. Looking forward to the future, the company has completed the acquisition of Fenmei, and is expected to further increase the market share of sterile packaging for liquid milk in the future.
Profitability has increased, and cost rates are under slight pressure. 1) In '23, the company achieved a gross profit margin of 21.7%, +4.4pct year-on-year, or mainly due to the decline in raw material prices. On the expense side, the company achieved sales/management/finance expense ratios of 2.3%/5.3%/-0.6%, respectively, compared to +1.0/+2.1/-0.6pct. The sales expense ratio and management expense ratio increased or added accrued equity incentives during the main period, compounding the impact of the increase in related expenses. Taken together, the company achieved a net interest rate of 9.8% to mother in '23, -0.7 pct year on year. 2) In 24Q1, the company achieved a gross profit margin of 22.5%, +3.6pct/month-on-month; on the cost side, the company achieved sales/management/financial expense ratios of 1.8%/6.7%/-0.4%, respectively, +0.2/+0.9/+1.5pct. Taken together, the company achieved a net profit margin of 12.0%, +2.3 pct compared to the previous year.
Investment advice: The company is a leader in the domestic sterile packaging industry. It is deeply tied to core customers, rapidly expanding production capacity, and gradually opening up room for growth. Considering that Fenmei's consolidated progress falls short of expectations, we expect the company's net profit to the mother of 1.96/2.25/255 million yuan in 2024-26 (the value was 338/404 million yuan before 24/25), corresponding to a PE of 19/17/15X in 24-26. Based on the DCF model, the company was given a 24-year target price of 11.3 yuan, maintaining a “strong push” rating.
Risk warning: Competition in the industry intensifies, raw material prices continue to rise, integration progress falls short of expectations, target performance falls short of expectations, etc.