Incident: The company released its 2023 annual report and 2024 quarterly report, announcing that in 2023, it achieved revenue of 1.14 billion yuan, -17.8%; realized net profit of 170 million yuan, or -35.8% year on year; 2024Q1 achieved revenue of 30 billion yuan, +31.0% year on year, and realized net profit of 0.28 million yuan, or -49.8% year on year.
The dawn of container paint has arrived. Due to tight capacity in 2021, container production peaked, leading to an increase in inventory in the container industry. However, in the first half of 2023, global container production was less than one million TEU, hitting a ten-year low. Affected by container inventory removal, the company's container paint revenue fell 38% year on year in 2023. As of April 19, the SCFI index has recovered to about double that of the same period last year, and the industry has reached an inflection point. As a result, in Q1 2024, the company's container paint revenue recovered to 220 million yuan, and revenue in a single quarter reached 37% of the full year of 2023. Meanwhile, container paint sales often recover before prices. In 2024, the unit price of Q1's container paint was 14,800 yuan/ton, which is still below the level of 2023. Profits are expected to rise further in the second and third quarters if prices recover to the level of previous years as demand recovers.
Wind power coatings continue to consolidate their leading position. The company is a leader in wind power blade coatings (mainly landwind). In Q1 2024, due to factors such as the year-on-year decline in the cost of raw materials such as isocyanates and curing agents, the unit price of the company's wind power paint showed a certain decline. Looking ahead to the whole year, from an industry perspective, China's wind power installation is expected to grow by 18.6% in 2024, according to the China Telecommunication Union. Looking at the company's business level, on the one hand, the company is actively developing wind power tower coatings and achieving sales to tower customers such as Taisheng Wind Energy and TBEA. On the other hand, the company is actively developing the ocean breeze paint business, which requires higher corrosion resistance, and is actively developing overseas paint markets. Due to the resonance of multiple factors, we believe that the company's wind power coatings business is expected to grow further in 2024. At the same time, the company continues to launch high value-added products such as front-edge protection, and product competitiveness continues to increase.
Entered the ocean for heavy corrosion protection and won the title of industrial coatings. The company's listed fund-raising project of 70,000 tons of high-performance coatings mainly revolves around marine and marine engineering coatings. It is committed to breaking the monopoly of foreign giants such as Jotun, International Paint, and PPG, and entering the 100 billion anti-corrosion blue ocean. In terms of marine coatings, the company has developed a series of difficult products such as antifouling paint, and certification work continues; in terms of bridge and steel structure coatings, the company aims to achieve breakthroughs in large-scale bridge (such as cross-sea bridges) coating projects of 50,000 tons or more; photovoltaic composite frame coatings have reached a strategic cooperation with Covestro, which is expected to contribute to growth during the year.
The 2023 dividend ratio was as high as 6.84%. Profit distribution was not implemented in the year before the company went public, and a large amount of undistributed profit was retained for all shareholders to share after listing. In 2023, the company's annual dividend plan was to pay a cash dividend of 1.3 yuan per share (2.5 yuan per share after taking into account the cash dividend already distributed in the medium term), and the total cash dividend reached 270 million yuan, accounting for 161.72% of the net profit attributable to shareholders of listed companies in the current period. Based on the latest market capitalization, the company's 2023 dividend ratio was as high as 6.84%. The high dividend highlights the company's strong confidence in investor feedback and long-term profitability.
Profit forecast and investment advice: The company is a leader in wind power and container coatings. It has entered the 100 billion heavy anticorrosive paint market, has huge room for growth, and its current valuation is safe. Affected by the downstream industry inventory cycle, we adjusted the company's 2024-2026 net profit forecast to RMB 2.5/3.5/450 million, corresponding PE to 16/11/9 times, maintaining a “buy” rating.
Risk warning: Production capacity construction falls short of expectations, raw material prices fluctuate, and the competitive pattern deteriorates.