Incident: The company released its 23 annual report and its quarterly report for '24, and achieved revenue of $2,461 and 688 million, respectively, with year-on-year changes of -0.38% and +23.14%; net profit to mother of 4.31 million yuan and 121 million yuan, with year-on-year changes of -3.54% and +29.35%, achieving net profit without deducted net income of 4.19 million yuan and 117 million yuan, year-on-year changes of -2.38% and +40.38%, with basic earnings per share of 1.08 and 0.30 yuan.
Sales achieved steady growth in 23 years, and 24Q1 profit performance was good: 4Q23/1Q24 achieved operating income of 5.45/688 million yuan, up 5.18%/23.14% year on year, and realized net profit to mother of 0.79/121 million yuan, year-on-year change of -15.14%/+29.35%. 1Q24 revenue increased significantly year-on-year, and profit performance was good. By business, sports grass revenue in '23 was 559 million yuan, down 6.58% year on year. Mainly due to tight domestic financial resources, construction plans for some social soccer fields and other sports facilities were delayed, and recreational grass revenue was 1,666 billion yuan, up 1.16% year on year. Mainly due to lower raw material costs, fierce price competition in some markets, and an increase in the share of European regions where prices are low, the revenue increase was less than the increase in sales. Total sales volume of artificial turf in '23 was 72.58 million square meters, up 12.21% year on year.
The gross margin increased in '23, and the net interest rate declined due to the increase in expenses during the period: the company's gross profit margin in '23 was 31.58%, up 2.84 pct year on year. By business, the gross margin of sports grass/ recreational grass increased by 4.55/1.81 pct year on year, mainly due to the decline in raw material prices and the continued high level of the US dollar exchange rate. In terms of the cost ratio for the period, the sales expense ratio increased by 0.81 pct to 5.37% year on year, mainly due to the increase in travel expenses and marketing expenses, the management expense ratio increased 0.30 pct to 4.17% year on year, the R&D expenses rate increased 0.16 pct to 3.37% year on year, and the financial expenses ratio increased 1.64 pct to -1.42% year on year, mainly due to a year-on-year decrease of 48.93 million yuan in exchange income. Under the combined influence, the company's net interest rate decreased 0.57 pct to 17.52% year on year.
Vietnam's phase III construction has begun, and production capacity continues to increase: Currently, the company has 56 million square meters of artificial turf production capacity in Vietnam; the Vietnam Phase III 20 million square meter project is expected to start construction in 24Q2. Vietnam's phase IV has been changed to Mexico. Currently, a land purchase agreement has been signed and payments have been made. It is expected that 16 million square meters of production capacity will be added after the entire operation is put into operation. The company will have 146 million square meters of artificial turf production capacity, further widening the production capacity gap with competitors.
Profit forecast and rating: We expect the company's net profit for 24-25 to be 5.37 billion yuan and 653 million yuan respectively, with year-on-year growth rates of 24.6% and 21.5%. The closing price on May 21 is 18.2 and 15.0 times PE in 24-25 years. Refer to comparable companies that give the company 23 to 25 times PE valuation in 24 years, corresponding to a reasonable value range of 30.82 to 33.50 yuan, giving a “superior to the market” rating.
Risk warning: Downstream demand is weak, production capacity investment falls short of expectations, and raw material prices fluctuate greatly.