Incident Overview
Yutong Technology released its 2024 mid-year report. 2024H1 achieved revenue of 7.353 billion yuan, +15.52% YoY; net profit to mother 0.497 billion yuan, +15.15% YoY; net profit after deducting 0.522 billion yuan, +3.96% YoY. In terms of cash flow, the net cash flow from 2024H1's operating activities was 1.292 billion yuan, or -44.22% year-on-year, mainly due to increased procurement expenses and manual instructions due to sales growth during the reporting period. Looking at the single quarter, Q2's revenue for the single quarter was 3.878 billion yuan, +12.18%; net profit to mother was 0.278 billion yuan, +11.23% year over year; net profit not returned to mother was 0.279 billion yuan, or -19.01% year over year. We determined that it was mainly due to the difference between profit and loss on exchange and profit attributable to mother.
In addition, the company plans to distribute cash of RMB 3.30 (tax included) for every 10 shares, for a total of 0.302 billion yuan, accounting for 60.76% of net profit to mother. The company continues to give back to shareholders and maintain a high dividend ratio.
Analytical judgment:
Revenue side: Overseas production capacity construction is progressing steadily, and revenue shows resilience.
Downstream demand is picking up, driving steady growth in the company's performance. According to Counterpoint Research, 24Q2 global smartphone sales increased 6% year on year, for the third consecutive quarter. According to Canalys, China's smartphone recovery was faster than the world, Q2 shipments increased 10% year on year, and the company's basic 3C packaging is expected to pick up at an accelerated pace. The company's intelligent construction progressed steadily. The first 24H1 overseas smart factory was put into operation in Vietnam, and 6 new smart factory construction products were launched. 2024H1 achieved revenue of 5.181 billion yuan, 1.39 billion yuan, and 0.547 billion yuan respectively, with revenue of +15.22%, +11.10%, and +28.84% year-on-year respectively. By region, 2024H1 achieved revenue in domestic and foreign markets respectively 5.134 billion yuan and 2.219 billion yuan, +9.55% and +32.20%, respectively. Under the weak domestic market consumption environment, the company actively explores overseas markets, grasps global trends, and diversifies operating risks. As of 2024H1, the company has built more than 50 production bases and 5 major service centers around the world, continuing to deepen its global layout and build a stable supply system.
Profit side: With the acceleration of intelligent chemical plants, gross margin increased significantly.
In terms of profitability, 2024H1's gross profit margin and net profit margin were 23.60% and 6.86% respectively, -0.01pct and -0.02pct, respectively. Among them, the gross profit margins and net margins for the Q2 single quarter were 24.95% and 7.22%, respectively, +1.43pct and -0.28pct, respectively. Overall profitability remained stable, and gross margin increased slightly. We believe this was mainly due to increased factory intelligence and lower overseas factory costs. By business, the gross margins of 2024H1's fine paper packaging products, packaging ancillary products, and environmentally friendly paper and plastic products were 24.20%, 21.83%, and 21.58%, respectively, +0.85pct, -2.06pct, and +1.17pct, respectively. In terms of the period expense ratio, the 2024H1 company's cost rate for the period was 14.48%, +1.40pct year on year. Among them, the sales expense ratio, management expense ratio, R&D expense ratio, and financial expense ratio were 3.07%, 6.88%, 4.75%, and -0.22%, respectively, +0.23pct, +0.91 pct. The year-on-year cost ratio increased. The significant increase in the financial expense ratio was mainly due to the significant appreciation of the US dollar in the same period last year.
Investment advice
The company is the world's largest manufacturer of boutique boxes, and its products occupy leading positions in the global consumer electronics and smart hardware industry, China's high-end liquor industry, and China's tobacco industry. The company's diversified customer development is gradually showing results. Other fields such as cigarette packs, cosmetics, and environmentally friendly packaging are developing rapidly, and the future can be expected. Due to the steady recovery of current downstream demand, we maintain our profit forecast. We expect revenue for 2024-2026 to be 17.989/20.726/23.651 billion yuan; EPS for 2024-2026 will be 1.86/2.16/2.50 yuan respectively, corresponding to the closing price of 22.07 yuan/share on August 26, 2024, PE is 12/10/9 times, respectively, maintaining the company's “buy” rating.
Risk warning
Risk of large fluctuations in raw material prices; risk of customer expansion falling short of expectations; increased risk due to industry competition.