Revenue was +3.3% year on year, and PS/PET multi-dimensional expansion laid the foundation for growth. The company achieved net revenue/return profit of 2,0556/231 million yuan in 2022, +3.3%/-3.8% year on year, lower than our forecast of 28.27/328 million yuan. The company's revenue in 2022 was still +3.3% year-on-year due to external environmental disturbances, but the net profit of the mother declined somewhat due to factors such as rising raw material prices. Since there is a big difference between the company's 2022 finished box and PET revenue compared to our previous expectations, and considering that the company's gross margin in 2022 fell 3.3 percentage points to 26.7% year on year, we lowered the company's net profit to the mother for 2023-2024 to 27/35 million yuan (original value: 44/640 million yuan), and introduced the 2025 return to mother net profit forecast of 430 million yuan. According to the comparable company Wind, the average value of 23E PE is 13.6x. Considering the release of production capacity from the company's two new overseas bases last year and the recovery in overseas consumption, the company was given 18.5x 23E PE with a target price of 37.48 yuan, maintaining the “increase in holdings” rating.

By region, the domestic growth rate was higher than overseas, and by product, the revenue growth rate of environmental protection equipment and lines was higher. By region, the company's domestic revenue growth rate in 2022 was 5.9% year on year, higher than the 2.5% year-on-year growth rate of overseas revenue, but overseas revenue still accounted for around 75%. By product, in 2022, the company's environmental protection equipment/PS lines/PS particles/finished box revenue was +45.5%/+13.6%/+3.97%/-8.3% to 0.4/5.25/3.6/1.03 billion yuan, mainly due to: 1) the sales volume of recycling equipment was +15.1% to 122 units, and the average sales price was +26% to 332,200 yuan/unit; 2) The unit sales price of PS lines was +12.7% to 5.82 yuan/meter when sales volume was only +0.86%; 3) finished frame products Sales volume was -8.6% compared to the same period last year, and the unit price was basically stable. However, due to rising raw material prices, etc., the company's gross margin fell 3.3 percentage points year on year to 26.7% in 2022.

Two major overseas projects under construction were put into operation one after another, and the release of production capacity is expected to drive performance growth. During the reporting period, 1) The company successfully put into operation the R-PET food-grade recycled particle production line in Malaysia's “50,000 tons/year PET recycling project”. So far, the three major product lines for high-quality PET recycling: SSP (solid phase thickening) food-grade particles, R-PET sheets and high-end fiber-grade particles have all been formed and can be sold abroad. In 2022, the company's PET sector achieved revenue of 79.61 million yuan; 2) The company's “annual output of 2.27 million boxes” in Vietnam The first phase of the “Plastic Decorative Frame and Wire Project” was successfully put into operation. Since it was put into operation in June 2022, the company has made efforts to speed up the release of production capacity and factory inspection progress for major European and American customers. The capacity utilization rate in the last two months has climbed to 60%, achieving revenue of 27.78 million yuan. The Malaysian PET project and Vietnam's continuous release of finished box production capacity are expected to drive the company's performance growth.

The target price is 37.48 yuan, maintaining the “increase in holdings” rating

We expect the company's net profit to be 2.7/35/43 million yuan in 2023-2025, corresponding to EPS 2.03/2.61/3.19 yuan, giving the company 18.5x 23E PE with a target price of 37.48 yuan, maintaining the “increase in holdings” rating.

Risk warning: the risk of overseas sales revenue being relatively high, the risk of international supply of raw materials, the risk of changes in plastic recycling policies, and the construction progress of fund-raising projects falling short of expectations.