incident. On March 30, 2024, the company released its 2023 annual report. Throughout 2023, the company achieved revenue of 640 million yuan, a year-on-year increase of 3.89%; realized net profit of 154 million yuan, a year-on-year decrease of 10.36%; and realized net profit of 145 million yuan after deduction, a year-on-year decrease of 2.04%. Among them, in 4Q2023, the company achieved revenue of 122 million yuan, a year-on-year decrease of 23.26%; realized net profit of 221 million yuan, a year-on-year decrease of 43.13%; and realized net profit of 0.23 million yuan after deduction, an increase of 36.49% over the previous year.
Driven by industry demand, the company's performance has maintained steady growth. By product, UHMWPE fiber and composite materials achieved revenue of 328 million yuan and 283 million yuan respectively in 2023, an increase of 27.57% and a decrease of 17.46% over the same period, respectively; gross margins were 37.53% and 39.98%, respectively, an increase of 0.96 percentage points and a decrease of 3.12 percentage points over the same period. By region, the company's domestic and overseas business achieved revenue of 292 million yuan and 319 million yuan respectively in 2023, up 9.97% year-on-year and 4.66% year-on-year, respectively; gross profit margins of 32.36% and 44.43% were achieved, respectively, a decrease of 4.57 percentage points and an increase of 1.44 percentage points over the same period.
Production capacity in the main business continues to expand, and performance is expected to increase steadily. Judging from the supply and demand pattern of the ultra-high molecular weight polyethylene fiber industry, domestic production capacity of ultra-high molecular weight polyethylene fiber is in the leading position in the world. Domestic production capacity accounts for half of the world. Driven by the increase in demand for military equipment, global demand for ultra-high molecular weight polyethylene fiber has maintained a high growth rate. As one of the first enterprises in China to master a complete set of ultra-high molecular weight polyethylene fiber production technology and industrialization of ultra-high molecular weight polyethylene fiber earlier, the company's production and export volume of ultra-high molecular weight polyethylene fibers are at the forefront of the domestic industry. By the end of 2023, the company had a production capacity of 5,320 tons of UHMWPE fiber, a comprehensive capacity utilization rate of 111.43%, and a production capacity of 3240 tons under construction. Among them, Yancheng Youhebo's production capacity of 1000 tons is expected to be completed and put into operation on March 31, 2024, and Xintai Branch's production capacity of 2,240 tons is expected to be completed and put into operation on June 30, 2024; the company has a composite (weightless cloth) production capacity of 1,550 tons, a comprehensive capacity utilization rate of 78.27%, and a production capacity of 625 tons under construction. Among them, Xintai Branch's 625-ton production capacity is expected to be completed and put into operation on June 30, 2024. With the construction and commissioning of the above projects, and the rapid growth trend in the downstream military and civilian sectors, the company's performance is expected to continue to improve steadily in 2024 and the future.
Investment advice: The company is a leading enterprise of ultra-high molecular weight polyethylene fiber in China. UHMWPE fiber and weftless cloth products will benefit from rapid growth in downstream demand for defense+civil use. We expect the company to achieve net profit of 203 million yuan, 306 million yuan and 420 million yuan in 2024-2026, EPS of 0.90 yuan, 1.36 yuan, and 1.87 yuan, respectively. The PE corresponding to the closing price on March 29 is 14, 9, and 7 times, respectively, maintaining the “recommended” rating.
Risk warning: Product price fluctuations, downstream demand falls short of expectations, project construction falls short of expectations.