The company released its 2023 annual report and 2024 quarterly report

24Q1 revenue of 500 million yuan, +52% year on year; net profit attributable to mother was 43.37 million, +136% year over year; net profit after deducting non-return to mother of 9.86 million, +8.3% year on year; non-recurring profit and loss of 34 million was mainly due to disposal of land income of 43 million yuan;

23Q4 revenue of $490 million, +24.2% year on year; net profit attributable to mother - 17.67 million, -151% year on year; net profit after deduction of non-return to mother - 21.81 million, -183% year on year; mainly due to impairment losses of goodwill of Tecca Depot and Sumter Easy Home of $43 million;

Revenue in '23 was 1.72 billion yuan, -12.9% YoY; net profit attributable to mother was 45.36 million, -74.7% YoY; net profit after deducting non-return to mother was 17.88 million, -88.5% YoY.

With the end of the warehousing situation of overseas customers and the gradual recovery of orders, leading domestic customers are demanding higher and higher supply chain quality and stability, and Q1 revenue and profit increased steadily.

In '23, the company plans to pay dividends of 38 million yuan (tax included), with a dividend rate of 85%; it plans to repurchase 10-20 million yuan of shares for employee shareholding or equity incentives.

Export sales are affected by customer withdrawals, and products lead industry changes

By region, domestic sales revenue in 23 years was 730 million, +62.5% year on year, gross profit margin 14.3%, -2.3 pct year on year; export sales were 990 million, -35.2% year on year, gross profit margin 22.9%, +1.0 pct year on year. Among them, competition in the export market is fierce. Overall sales declined due to inventory removal from foreign customers, the scale effect decreased, and net profit declined.

By product, revenue from plastic products in '23 was 1.3 billion, accounting for 76% of revenue, -22%; total biodegradable degradation was 260 million, accounting for 15% of revenue, +87% year-on-year; and vegetable fiber was 90 million, accounting for 5% of revenue, +5% year-on-year. The company vigorously develops biodegradable products and vegetable fiber products, adapting to and leading industry changes while also diversifying business risks.

Diverse customer service, global layout of production capacity

The company has mastered both biodegradable material modification technology and large-scale intelligent manufacturing technology for high-quality products; at the same time, the well-known customer base has created very favorable conditions for development. The company can currently produce tens of thousands of products of different types and specifications in the two major categories of tableware and household daily necessities, covering various aspects of catering, new tea and home life, and can provide customers with multiple categories and one-stop procurement services.

In terms of production capacity, on the one hand, the company continues to improve the level of equipment manufacturing and intelligence to effectively improve production lines; on the other hand, it is actively expanding production capacity, continuing to promote the construction of new production capacity by subsidiaries such as Shanteng Yihong, Guangxi Lulian, Dongguan Yilian, and Thailand, to accelerate the expansion of the company's production capacity for degradable environmentally friendly products and household daily necessities, and further expand the company's business sector.

Asset impairment had a significant impact in '23, and profitability improved in Q1

The company's gross profit margin in '23 was 19.2%, the net profit margin was 1.6%, the year-on-year -7.3pct; the decline in profit margin was mainly due to impairment losses of 43 million in goodwill such as Home Depot and Sumter Easy Home in '23; judging from the cost performance, the 23 years' sales/management/ R&D/ finance expense ratios were 5.4%/6.4%/3.3%/0.2%, respectively, of which the increase in management rates was mainly due to the increase in management rates The size of the company has expanded and the number of management personnel has increased, and financial expenses are affected by increased interest expenses and reduced exchange earnings;

24Q1 gross profit margin 19.3%, year-on-year +0.1pct, net profit margin 8.4%, year-on-year +2.7pct, profitability restoration.

Adjust profit forecasts to maintain “gain” rating

As the share of the company's domestic sales increases and export sales continue to recover, we expect the company's performance to bottom out and rebound. According to the 23 annual report and the quarterly report for '24, the sales and production situation in the first quarter will be weak compared to the demand for the remaining quarters. As the company gradually releases production capacity for new products and increases in domestic sales revenue and profit, we have adjusted the profit forecast. It is estimated that the net profit due to the company will be 1.8/21/250 million for 24-26 ($13/150 million for 24-25 years ago), and PE will be 21X/18X/15X, respectively.

Risk warning: Domestic customer volume falls short of expectations, production capacity progress falls short of expectations, overseas demand recovery falls short of expectations, etc.