Incident: On May 24, 2024, the company issued the “Notice on the Progress of Planning Major Asset Restructurings”. The transaction plan to purchase COFCO Packaging continued to advance. As of the date of this announcement, Orekin indirectly held 24.40% of the shares in the target company. On December 12, 2023, the company issued an announcement planning to acquire all issued shares of COFCO Packaging in cash; on February 7, 2024, the company announced that it further clarified the source of acquisition capital and partners, and the comprehensive tender offer was progressing steadily.
In the medium to long term, the competitive pattern of two-piece cans in the Chinese market is expected to improve markedly. In 2022, the market share of Orekin, Baosteel Packaging, COFCO Packaging, and Shengxing Co., Ltd. in the two-piece can market in China was 22%, 18%, 17%, and 15%, respectively. If the deal is implemented, Orekin's market share will further increase, and the optimization of the two-piece can industry pattern is expected to improve the overall profit level of the industry.
The company's operations have been improving steadily, and profits have improved markedly. For the full year of 2023, the company achieved revenue of 13.843 billion yuan, a slight decrease of 1.59% year on year, net profit to mother of 775 million yuan, +37.05% year on year. Of these, 23Q4 achieved revenue of 3.136 billion yuan, -2.09% year on year, and net profit to mother 68 million yuan, +214.02% year on year.
2024Q1 achieved revenue of 3.551 billion yuan, +5.95% YoY, +13.25% month-on-month, and realized net profit to mother of 279 million yuan, +32.68% YoY and +310.15% YoY. The company's three-piece can business grew steadily. Among them, innovative products performed well and were favored by the market; sales of the two-piece can business increased year-on-year, and profit levels improved. The company continues to promote innovative products and develop markets, and promote an international development strategy. In 2023, the company cooperated with COFCO Packaging to invest and build production bases in central and eastern Europe, deepen cooperation with international customers through overseas layout, and steadily advance the company's internationalization process.
Explore innovative supply chain cooperation models to guarantee the company's cost advantage. The company will continue to explore new procurement channels, consolidate and deepen cooperation with strategic suppliers, and actively explore innovative supply chain cooperation models to ensure the company's safe and stable raw material supply and competitive cost advantage. Continuously optimize all processes in the supply chain, establish and improve warehousing and logistics information systems, and implement lean management to achieve efficient operation and management of the supply chain.
Watch that demand for two-piece cans may continue to be released under peak season catalysis. Influenced by the downstream food and beverage industry, demand for metal packaging showed certain seasonal characteristics. Under peak season catalysis, the company's performance in the second quarter is expected to maintain steady growth. The scale effect of the packaging industry is relatively obvious. Steady revenue growth is expected to dilute fixed costs, helping the profit side maintain good performance.
Profit forecast and rating: At the industry level, medium- to long-term outlook, with the implementation of the COFCO Packaging acquisition, the metal packaging industry pattern is expected to be optimized. The company is a leader in the metal packaging industry, serving well-known brands such as Red Bull, Zhanma, Dongpeng Beer, Budweiser Beer, Tsingtao Brewery, Yanjing Beer, Feihe, etc., providing customers with customized and integrated packaging solutions, and stable strategic customer cooperation. The net profit for 2024-2026 is expected to be 950 million yuan, 1.08 billion yuan, and 1.19 billion yuan respectively. The corresponding PE is 12x, 11x, and 10x, respectively. Refer to comparable company valuation levels and give the company a “recommended” rating.
Risk warning: Risk of high customer concentration, risk of fluctuating raw material prices, certain uncertainty in transactions, increased industry competition, etc.