Incident: The company released its 23 annual report and its quarterly report for '24. It achieved revenue of $186.93 and 4.398 billion yuan, up 1.80% and 5.69% year on year; realized net profit of 1.82 billion yuan and 101 million yuan, with year-on-year changes of -20.27% and +120.23%, achieving net profit not deducted from mother of 1.21 and 95 million yuan, year-on-year changes of -45.42% and +117.29%, with basic earnings per share of 0.15 and 0.08 yuan.
Sales increased year-on-year in '23, and profit declined month-on-month in 24Q1:4Q23/1Q24 achieved operating income of 50.15/4.398 billion yuan, up 11.05%/5.69% year-on-year, and realized net profit of 275/101 million yuan, up 171.44%/120.23% year-on-year, 1Q24 revenue grew steadily, and profitability declined month-on-month. By business, white cardboard sales increased 9.48% to 2.7969 million tons in '23, revenue fell 8.86% to 11.941 billion yuan, box board paper sales increased 7.16% to 541,600 tons, and revenue fell 11.16% to 1,832 billion yuan. We believe mainly due to the decline in wrapping paper prices in '23, sales of cultural paper increased 124.91% to 840,500 tons, and revenue increased 105.92% to 4.245 billion yuan. We believe that sales were mainly due to new production capacity contributing to sales volume.
With the exception of white cardboard, gross margin increased in 23, and net margin declined slightly: in '23, the company's gross profit margin was 10.83%, down 0.82pct year on year. By business, the gross margin of white board/box board/cultural paper changed by -2.71/+2.57/+4.94pct year on year, respectively, and the gross margin outside of white cardboard increased. In terms of the cost ratio for the period, the sales expense ratio increased by 0.28 pct to 0.96% year on year, mainly due to the increase in sales staff, the management expense ratio decreased by 0.05 pct to 2.98% year on year, the R&D expense ratio decreased 0.21 pct to 3.84% year on year, and the financial expenses ratio increased 0.64 pct to 2.39% year on year, mainly due to increased exchange losses. Under the combined influence of the increase in exchange losses, the company's net interest rate decreased 0.27 pct to 0.97% year on year.
Promote the construction of new projects in Jiangsu and accelerate the cultivation of new product markets: In terms of production, the Jiangsu base will continue to promote the construction of a high-grade special cardboard expansion project with an annual output of 800,000 tons. The plan includes the production of products such as all-wood pulp “zero plastic” paper cup paper, high-end social card paper, and cigarette card paper to better serve the diverse needs of customers in East China and overseas. The Shandong base will accelerate the industrialization of sterile liquid paper packaging and expand the application base of customers.
Profit forecast and rating: We expect the company's net profit for 24-25 to be 6.72 billion yuan and 975 million yuan respectively, with year-on-year growth rates of 269.3% and 45.1%. The closing price on May 21 corresponds to the 24-25 PE of 11.9 and 8.2 times. Refer to comparable companies that give the company a PE valuation of 13 to 14 times in 24 years, corresponding to a reasonable value range of 6.50 to 7.00 yuan, giving a “superior to the market” rating.
Risk warning: The cost of raw materials fluctuates greatly, downstream demand is weak, and the release of production capacity falls short of expectations.