The company released its 2024 semi-annual report: 2024H1 achieved operating income of 7.353 billion yuan (YoY +15.5%), net profit of 0.497 billion yuan (YoY +15.2%); single Q2 achieved operating income of 3.878 billion yuan (+12.3% YoY), and net profit of 0.278 billion yuan (YoY +11.2%). The consumer electronics sector recovered moderately, growing steadily at a low base, and environmentally friendly paper and plastic continued to grow rapidly; the company's supply chain advantages are obvious, overseas layout is promising, and the leading platform position is prominent.
The 3C business is recovering steadily, and the resilience of the diversified layout is highlighted. The company's 2024H1 paper boutique packaging/packaging ancillary products/environmentally friendly paper and plastic products/other products achieved revenue of 51.81/1.39/0.547/0.104 billion yuan (YoY +15.2%/+11.1%/+28.8%/+24.2%), with gross margins of 24.2%/21.6%/13.6% (+0.9pct/-2.1pct/+1.2pct/-18.5pct), with steady revenue growth and stable gross margin. By sector, 3C demand continues to recover. We expect Q2 revenue to grow by about double digits. With the peak consumer electronics demand season in the second half of the year, order expectations will continue to be steady; demand for tobacco and alcohol packs stabilizes, new customers are introduced smoothly, and growth is maintained at a low base; the environmentally friendly paper and plastic business is growing beautifully, and the contribution of meal package customers is increasing.
Overseas production capacity layout is forward-looking, international delivery capacity is leading, and intelligence is being promoted at an accelerated pace. The company took the lead in setting up overseas factories in Vietnam in 2010. As of May '24, the company had established 7 production bases in Vietnam, India, Indonesia, Thailand, Malaysia, etc., and continued to increase investment in overseas markets, promote the commissioning of the Surabaya project in Indonesia, the Jakarta project in Indonesia, the Binh Duong project, and the Delhi project in India, start construction of new plants in Mexico (heavy packaging) and the Philippines (leather box packaging), and explore new packaging categories. At the same time, intelligent upgrading of software and hardware facilities in overseas factories was launched. As of the end of 24Q2, smart factories in Xuchang, Suzhou, Hunan, Chengdu and Jiujiang were fully put into operation. Smart warehouses in Vietnam and Longgang were completed and the second phase of construction was being promoted. Under construction of plants in Guizhou, Jiangsu, and Dongguan, Luzhou, Chongqing, Yantai and Haikou were in the planning and preparation stage, and smart factory construction was accelerated, and long-term competitive advantages were enhanced.
Profitability is expected to continue to increase along with internal cost reduction and efficiency and an increase in overseas share. 24Q2's gross margin was 25.0% (+1.4pct year on year), net profit margin was 7.2% (YoY -0.1pct), and sales/management/R&D expenses were 3.4%/6.9%/4.9% (YoY +0.3pct/+0.6pct/+0.5pct). 24H1 continued to invest in overseas factories and the domestic consumption environment, and profitability remained stable. In terms of operating capacity, the company's 24Q2 net operating cash flow was 0.494 billion yuan (year-on-year -0.784 billion yuan). The decline in cash flow was mainly due to a high 23H1 repayment base and overall health; 53 days of inventory turnover as of the end of 24Q2 (-10 days), 129 days of accounts receivable turnover (-17 days), and 87 days of payables turnover days (+1 day year over year), and operating capacity optimization.
Capital expenditure has declined, performance is steady, and dividend attributes are prominent. In the future, the company's capital expenditure is expected to be steadily reduced. Mid-term dividends will be implemented in 24 and a half years, with a dividend rate of 60.7%. At the same time, a new round of repurchases will be implemented in 24. The plan is to repurchase 0.1-0.2 billion yuan (15 million yuan has already been repurchased), and high dividends will continue to give back to shareholders. Assuming that the company's 24-year dividend rate is 60%, corresponding to the current dividend rate of about 5%, the appeal is outstanding.
Profit forecast and investment rating: We expect net profit to be 1.65/1.89/2.12 billion yuan for 2024-2026, respectively, and the corresponding PE is 12.5X/10.9X/9.7X, respectively, maintaining a “buy” rating.
Risk warning: The recovery in market demand fell short of expectations, competition intensified, and raw material prices rose above expectations.