Incident: Haoyue Nursing released its 2023 report. In 2023, we achieved operating income of 2,757 billion yuan, a year-on-year decrease of 1.62%, and realized net profit of 439 million yuan, an increase of 3.72% over the previous year, and realized net profit without deduction of 423 million yuan, an increase of 7.37% over the previous year. Q4 achieved revenue of 682 million yuan, a year-on-year decrease of 16.51%, and realized net profit of 128 million yuan to mother, a year-on-year decrease of 19.98%. The company's 2023 cash dividend was 260 million yuan (tax included), with a dividend ratio of 60%.
Comment:
Product revenue was affected by the reduction in raw material prices, own-brand wipes grew rapidly, and the domestic and foreign production capacity layout continued to deepen. The company achieved revenue of 2,757 billion yuan in 2023, a year-on-year decrease of 1.62%.
By product, in 2023, the company achieved revenue of 1,976 billion yuan for baby hygiene products, a year-on-year decrease of 2.79%, mainly due to a decrease in raw material costs. The company took the initiative to adjust the unit sales price. The sales volume of baby hygiene products was +3.48% year over year, and the unit price was -6% year over year. Adult hygiene products achieved revenue of 555 million yuan, down 10.61% year on year, sales volume -7.58% year on year, and unit price -3.93% year on year. Other products achieved revenue of 148 million yuan, an increase of 69.66% over the previous year, mainly due to the increase in revenue from wet toilet paper and wet wipe products produced by the company. The independent brands Duffy wet wipes and wet toilet paper home care series products have become KA level brands on several mainstream e-commerce platforms such as Douyin and Tmall. At the same time, key channels such as Douyin are anchored, and marketing promotion is carried out across all platforms. By region, the company achieved domestic and overseas revenue of 2,371 million yuan and 307 million yuan respectively in 2023, a year-on-year decrease of 4.35% and an increase of 17.56%, respectively. The company's overseas growth was mainly due to a sharp increase in the operating income of Haoyue Thailand and an increase in the business volume of overseas brother companies with major customers. Among them, the company's Sunny Baby brand entered major supermarkets in Thailand. Through marketing and promotion activities, the Thai company strengthened the construction of traditional local channels and online e-commerce. Through cooperation with local traditional channel dealers, the Thai company sold the company's products to neighboring countries such as Laos and Myanmar, achieving a rapid increase in sales revenue. In terms of production capacity, the company's Hubei plant passed the inspection, and a production and operation team was formed to successfully pass factory inspection and product verification for major multinational customers and major domestic customers, gradually releasing production capacity and further improving customer viscosity. The company has now set up production bases in Hangzhou, Jiangsu, Thailand, Hubei, etc., and plans to acquire Kao's Hefei plant. The company announced an investment of 30 million US dollars to establish Haoyue Mexico, establish a Mexican production base, and enhance comprehensive and in-depth business cooperation with world-renowned multinational companies in North America and South America.
Gross margin improved as scheduled, export gross margin performance was impressive, and overall profit was steady. 1) Gross profit margin. The company achieved a gross profit margin of 26.94% in '23, +3.79pct year on year; Q4 gross margin was 29.04%, +4.29pct year on year. The significant increase in gross margin was mainly due to a reduction in procurement costs for raw materials such as polymers, non-woven fabrics, rubber, etc. At the same time, the company further increased its own production of non-woven fabrics to replace external procurement of non-woven fabrics to comprehensively reduce material costs. By region, domestic and overseas gross margins in 2023 were 25.13% and 31.39%, respectively, compared to +2.58pct and +11.13pct, respectively. The company strengthened business cooperation with major customers of multinational companies. The cooperative business for high-end products extended from the original domestic market to overseas, the proportion of high-end product export business gradually increased, and the gross margin of the export business increased steadily. 2) Period expense ratio. The company's 23-year sales, management, R&D, and financial expense ratios were 4.97%, 2.37%, 3.80%, and -1.91%, respectively, with year-on-year changes of +1.5pct, +0.3pct, +0.18pct, and -0.44pct, respectively. The increase in sales expense ratio was mainly due to the company increasing product promotion, and the increase in management expense ratio was mainly due to an increase in employee remuneration and depreciation and amortization. 3) In terms of net profit, the company achieved net profit of 439 million yuan in '23, up 3.72% year on year, net interest rate of 15.91%, +0.82pct year on year; net profit from Q4 alone was 128 million yuan, down 19.98% year on year. 4) Cash flow. Cash flow from the company's 23 years of operation was 780 million yuan, +32.4% year over year, mainly due to an increase in sales repayment; cash flow from investment activities - 360 million yuan, -234% year over year, which mainly reduced monetary financial management; and cash flow from financing activities was 0.1 billion yuan, +121% year over year, mainly due to loans and reduced repurchases of the company's shares. 5) Dividends. The company's 2023 cash dividend was 260 million yuan, with a dividend ratio of 60%. The current stock price corresponds to a dividend rate of about 4.7%. The dividend increases focus on shareholder returns.
Profit forecast and investment rating: As a leading domestic direct manufacturer and seller of absorbent hygiene products, the company has leading product R&D and innovation capabilities, continuously increasing customer share and developing new customers to create growth potential. The perfect domestic and foreign production capacity layout helps to expand incremental customers, and overseas own-brand products are also expected to contribute to growth. We expect the company's net profit to be 498 million yuan, 566 million yuan, and 647 million yuan respectively, up 13.6%, 13.6%, and 14.4% year-on-year respectively. The current stock price corresponds to the 24-year PE of 11x, maintaining the “increase” rating.
Risk factors: Market competition increases the risk and the risk of a sharp rise in raw material prices.