Incident: The company released its 23 annual report and its quarterly report for '24. It achieved revenue of 85.53 billion yuan and 2,209 billion yuan, up 10.53% and 20.22% year on year; net profit to mother of 6.64 billion yuan and 269 million yuan, with year-on-year changes of -6.55% and +120.14%, achieving net profit without deducted net income of 5.95 million yuan and 237 million yuan, up 6.81% and 105.97% year-on-year, with basic earnings per share of 0.94 and 0.38 yuan.
Sales growth drove revenue growth in 23 years, and the 24Q1 performance was good: 4Q23/1Q24 achieved operating income of 23.41/2209 million yuan, up 5.05%/20.22% year on year, and realized net profit to mother of 2.82/269 million yuan, up 96.74%/120.14% year on year. 1Q24 revenue and profit performance was good. Total sales in '23 increased 19.65% to 971,300 tons. By business, the food and medical packaging materials series grew rapidly in '23, with sales increasing 49.01% to 229,800 tons, revenue up 14.62% year on year to 1,732 million yuan, sales of the daily consumer series increased 19.34% to 466,400 tons, revenue increased 15.49% to 4.107 billion yuan, and sales of the electrical and industrial paper series increased 22.2% to 63,300 million tons, and revenue increased 17.93% to 681 million yuan.
The financial expense ratio increased in '23, and the net interest rate declined: in '23, the company's gross profit margin was 11.62%, up 0.11pct year on year; the gross margin of the household, commercial, and tobacco industry series increased by 0.98/2.49/1.33pct, respectively; the gross margin of the food and medical packaging materials series decreased 4.75pct to 6.92% year on year. In terms of the cost ratio for the period, the sales expense ratio increased by 0.04 pct to 0.38% year on year, the management expense ratio increased by 0.11 pct to 1.72% year on year, the R&D expense ratio decreased by 0.02 pct to 1.32% year on year, and the financial expense ratio increased by 1.26 pct to 2.13% year on year, mainly due to increased interest expenses due to the increase in loan size. Under the combined influence, the company's net interest rate decreased by 1.44 pct to 7.80% year on year.
Food card production capacity has been gradually released, and the two new bases are about to be put into operation: in April '23, the company's fund-raising project of 300,000 tons of food cards was officially put into operation. For the first time, it entered the GaokeZhong special cardboard circuit. Annual production and sales reached 1197/105,700 tons. Currently, the profit situation has improved dramatically. Two new bases, Laibin, Guangxi and Shishou, Hubei, are being steadily implemented. The Hubei project was launched for trial operation in early '24, and the Guangxi project will also be put into operation in mid-'24. Hubei has poplar and reed resources, and Guangxi has fast-growing eucalyptus resources. The commissioning of the two projects will enable the company to achieve an “integrated use of forest pulp and paper” entire industry chain layout to make up for the shortcomings of upstream pulp production.
Profit forecast and rating: We expect the company's net profit for 24-25 to be 10.66 billion yuan and 1,352 billion yuan respectively, with year-on-year growth rates of 60.5% and 26.9%. The closing price on June 7 corresponds to the 24-25 PE of 12.6 and 9.9 times. Refer to the comparable company giving the company a PE valuation of 17 to 19 times in 24 years, corresponding to a reasonable value range of 25.67 to 28.69 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.