Key points of investment:
Incident: The company released its 23 annual report and 2014 quarterly report. It achieved revenue of 15.2.23 billion yuan and 3.476 billion yuan in the first quarter of '23 and '24, respectively; realized net profit of 14.38 billion yuan and 219 million yuan, with year-on-year changes of -3.35% and +20.55%, achieving net profit not deducted from mother of 14.94 million yuan and 243 million yuan, year-on-year changes of -1.40% and +54.32%, with basic earnings per share of 1.57 and 0.24 yuan.
Revenue declined in '23 due to the external environment, and the Q1 revenue and profit growth rate rebounded month-on-month: 4Q23/1Q24 achieved operating income of 4.416/34.76 billion yuan, an increase of 2.10%/19.37% year-on-year, and realized net profit of 4.53/219 billion yuan, a year-on-year change of -3.44%/+20.55%, and 1Q24's revenue and profit growth rate increased month-on-month. Affected by changes in the external environment in '23, revenue from fine paper packaging/ancillary products/environmentally friendly paper and plastic declined by 6.58%/7.89%/4.73% to 110.36/26.14/1.064 billion yuan respectively.
Q1 gross margin declined and net margin increased: 1Q24, the company's gross profit margin was 22.09%, down 1.63pct year on year.
In terms of the cost ratio for the period, the sales expense ratio increased by 0.15 pct to 2.70% year on year, the management expense ratio decreased by 0.12 pct to 6.88% year on year, the R&D expense ratio decreased by 0.52 pct to 4.61% year on year, and the financial expense ratio decreased 2.57 pct to -0.30% year on year, mainly due to the increase in exchange earnings due to the appreciation of the US dollar. Under the combined influence, the company's net interest rate increased by 0.31pct to 6.45% year-on-year.
Smart factory construction is progressing comprehensively, and overseas model factory construction has started: The company has basically completed benchmark smart factory construction in major regions in China in 23 years; smart factory construction in Hunan, Suzhou and Chengdu has been implemented; smart factory construction in Jiujiang and Longgang is underway; intelligent construction in Luzhou, Chongqing, Yantai and Haikou is also being planned and promoted, and construction of the first smart factory in Vietnam has started overseas to build the company's overseas smart model factory. Intelligent construction has improved the company's operation and management efficiency, and the labor cost reduction effect is obvious. The labor cost rate for the paper product packaging business decreased further by 0.97 pct to 12.13% year on year in '23.
Increase investment in overseas markets and continue to improve overseas layout: The company has been focusing on customer development and overseas layout for 23 years, continuously improving overseas solutions and delivery service layouts, adding a number of major international customers in the fields of tobacco, eco-friendly packaging, artificial intelligence, toys, food, etc., the new Malaysian factory has passed customer certification and successfully put into operation, and the new environmentally friendly packaging plant in Vietnam has also been successfully put into operation. In 24 years, the company will continue to promote the construction of new factories in Surabaya, Indonesia, Pingyang, Vietnam, and Delhi, India. The company will start construction of new factories in Mexico and the Philippines, and plan to start production within the year. Transformation to enhance core manufacturing capabilities.
Profit forecast and rating: We expect the company's net profit for 24-25 to be 16.96 billion yuan and 19.88 billion yuan respectively, with year-on-year growth rates of 17.9% and 17.2%. The closing price on June 6 corresponds to the 24-25 PE of 14.2 and 12.2 times. Refer to the comparable company giving the company a PE valuation of 20 to 22 times in 24 years, corresponding to a reasonable value range of 36.40 to 40.04 yuan, giving a “superior to the market” rating.
Risk warning: Downstream demand is weak, and raw material prices fluctuate greatly.