On April 27, the company released its annual report. 23A achieved revenue of 8.55 billion yuan, +10.5% year on year; of these, 4Q23 achieved revenue of 2.34 billion yuan, +5.1% year on year; of these, 4Q23 achieved revenue of 2.34 billion yuan, +96.7% year on year, net profit from non-return mother of 280 million yuan, +196% year on year.
Sales continued to grow rapidly throughout the year, and 300,000 tons of food cards were put into operation, improving the layout of high-grade heavy products. 23A paper sold 971,000 tons (+19.6% YoY), of which 2H sales volume was 582,000 tons (YoY +9.2%/+49%). 2H sales increased significantly mainly due to rising new production capacity and warmer consumption during peak season. The price of 1H/2H ton was 9664/8232 yuan (+481/-1627 yuan). 1) By category, 23A sales volume of paper for daily consumption/food and medical/tobacco supply/business communication and electronics industry was 46.6/23/9.2/9.5/63,000 tons, respectively, +19.3%/+22.2% year-on-year, with food card sales of 106,000 tons. 2) Subregion: 23A Domestic/export sales revenue of 75.3/570 million yuan, +11.2%/-5.1% YoY. The decline in export sales was mainly due to the exclusion of some trade operations.
Starting at 2H, cost pressure weakened, and tons of profit recovered quarterly. 1H23 was accompanied by the introduction of new upstream production capacity, and after bottoming out in June, slurry prices steadily entered a slow upward cycle. Annual pulp costs declined quarterly, with gross profit of 23A ton of 1,023 yuan (YoY -373 yuan), 1H/2H ton gross profit of 879/1119 yuan (-131/+240 yuan month-on-month); 23A ton net profit (excluding Xia Wang, same below) 463 yuan (YoY -270 yuan), 1H/2H tonne net profit of 266/794 yuan (YoY -48-794 yuan) 1/+528 yuan). Xia Wang 23A's net profit was 440 million yuan (+78%), with a net profit margin of 13.3%, mainly due to the better pattern of decorative paper and better export performance. Starting in 1Q24, pulp prices have entered an upward cycle. Considering that paper types such as glassin/heat transfer have recently begun to increase prices steadily, the company actively carried out a strategic inventory of low-cost pulp in the early stages, and is optimistic that subsequent profit flexibility will be realized. At the end of '23, the raw material inventory at the reporting end of '23 was 1.56 billion yuan (+54% year over year).
The company strengthened the efficiency of cost control. 23A sales/management & R&D/finance expenses ratio was 0.38%/3.04%/2.13%, flat year-on-year level/+0.1/+1.25pct, with a net interest rate of 7.8% (-1.44pct year on year).
The year 24 welcomed a year of increased production capacity investment. The growth path for the expansion of multiple categories was clear, the integrated layout of Lin Pulp and Paper was promising, and comprehensive capacity continued to improve. In the first half of '24, the first phase of paper and pulp production capacity was launched in Hubei and Guangxi. From a medium- to long-term perspective, the company will gradually transform into an integrated forest/grass, pulp and paper enterprise, and its competitiveness and profit stability will be further enhanced.
Along with the rise in paper prices and the release of production capacity, we expect net profit to be 960 million yuan, 13.6 billion yuan, and 16.1 billion yuan respectively in 24-26. The current stock price corresponds to PE 13.3/9.4/8X, respectively, to maintain a “buy” rating.
Risk warning
The risk of paper prices fluctuating due to weak downstream demand; the risk that the progress of new production capacity investment falls short of expectations, and the price of raw materials fluctuates greatly