Incident: The company released its 23 annual report and its quarterly report for '24. It achieved revenue of 39.76 billion yuan and 952 million yuan, up 15.70% and 4.15% year on year; realized net profit of 5.66 billion yuan and 147 million yuan, up 21.13% and 36.59% year on year, and realized net profit without deducted return of 5.28 million yuan and 145 million yuan, up 16.43% and 49.95% year on year, with basic earnings of 1.72 and 0.45 yuan per share.
The investment of new production capacity drove revenue growth in 23 years, and the profit performance in 24Q1 was relatively good: 4Q23/1Q24 achieved operating income of 9.92/952 million yuan, up 4.74%/4.15% year on year, and achieved net profit of 1.69/147 million yuan, up 23.82%/36.59% year on year. 1Q24 revenue grew steadily, and profit performance was good. By business, sales of decorative base paper in '23 were 305,900 tons, up 34.18% year on year. Mainly due to new production capacity in Ma'anshan, decorative base paper revenue increased 30.35% year on year to 3.107 billion yuan, and wood pulp trade revenue fell 14.89% year on year to 824 million yuan.
The gross margin of decorative base paper increased, and the net margin increased: in '23, the company's gross profit margin was 19.05%, up 0.58pct year on year, and the gross margin of decorative base paper/wood pulp trade changed by +3.05/-10.52pct year on year, respectively. In terms of the cost ratio for the period, the sales expense ratio increased by 0.02 pct to 0.61% year on year, the management expense ratio decreased by 0.08 pct to 1.31% year on year, the R&D expense ratio increased 0.34 pct to 3.04% year on year, and the financial expense ratio increased by 0.01 pct to -1.27% year on year. Under the combined influence, the company's net interest rate increased 0.67 pct to 14.21% year on year.
High-quality production capacity is steadily expanding, and export share is growing rapidly: the first phase of the company's specialty paper production line expansion project with an annual output of 180,000 tons was successfully put into operation in '23, and production capacity expanded to 350,000 tons. Subsequent companies will focus on R&D and innovation of new varieties and technologies to promote a moderate expansion of production capacity. The company actively explores the international high-end market and has established good cooperative relationships with many well-known foreign manufacturers. Its products cover Europe, Asia and other countries, with export revenue of 780 million yuan in 23 years, an increase of 66.90% over the previous year, accounting for more than 25% of papermaking revenue.
Profit forecast and rating: We expect the company's net profit for 24-25 to be 6.65 billion yuan and 753 million yuan respectively, with year-on-year growth rates of 17.4% and 13.2%. The closing price on June 6 corresponds to the 24-25 PE 10.7 and 9.4 times. Refer to the comparable company's PE valuation of 14 to 16 times in 24 years, corresponding to a reasonable value range of 28.00 to 32.00 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.