Performance summary: The company released its 2023 annual report and 2024 quarterly report. In 2023, the company achieved revenue of 1.34 billion yuan, -11.8% year on year; realized net profit of 100 million yuan, or -31.4% year on year; realized deducted non-net profit of 110 million yuan, -4.3% year on year. Looking at a single quarter, 2023Q4 achieved revenue of 350 million yuan, -6.5% year on year; realized net profit of 0.2 billion yuan, or -33.2% year on year; realized net profit of 30 million yuan after deduction, +24.6% year on year. 2024Q1 achieved revenue of 380 million yuan, +35.2% year on year; realized net profit of 40 million yuan, which significantly reversed losses year on year; realized net profit of 40 million yuan after deduction, which significantly reversed losses year on year. The 24Q1 company's orders were marginally repaired, and revenue and profit improved significantly.
Reduced costs led to an improvement in gross margin and a steady recovery in profitability. In 2023, the company's overall gross margin was 17%, +3.3pp; 2023Q4 gross margin was 18.6%, +3.3pp year on year; benefiting from the recovery of production capacity utilization and the year-on-year decline in procurement prices for raw materials such as superimposed wood pulp, the gross margin of the product was significantly restored. By product, the gross margin of disposable pet hygiene products was 17.9% (+3.9pp), of which the gross margin of pet pads was 15.8% (+4.3pp), the gross margin of pet diapers was 46.1% (-1.0pp); the gross margin of non-woven fabrics was -3.5% (-4.7pp); and the gross margin of personal disposable hygiene products was 23.8% (-0.4pp). In terms of the cost ratio, the company's total expense ratio was 5.5%, +2.2pp compared to the same period. Among them, the sales expense rate/management expense rate/ financial expense rate/ R&D expenses ratio were 2%/3%/-1.2%/1.8%, respectively, +0.7pp/+0.2pp/+0.8pp/+0.4pp. The increase in the sales expense ratio was mainly due to the increase in the company's marketing and promotion expenses. The increase in the financial expense ratio was mainly due to a decrease in exchange rate changes compared to the same period. Taken together, the company's net interest rate was 7.7%, -2.2pp year on year; 2023Q4 net interest rate was 4.5%, -1.8pp year on year. 2024Q1 gross margin was 18.2%, +11.2pp; in terms of cost ratio, the company's total expense ratio was 4.9%, -4.1pp, mainly due to exchange rate changes. Among them, sales/management/finance/R&D expense ratios were +0.1 pp/ -0.5 pp/ -2.8 pp/ -0.8 pp year on year, respectively. The 2024Q1 net margin was 11%, +11.8pp year on year, and profitability continued to improve.
The release of production capacity helps repair performance, and the product structure is gradually optimized. In terms of categories, the revenue of disposable pet hygiene products reached 1.25 billion yuan in 2023, -13.3% year-on-year. Among them, pet pad revenue was 1.16 billion yuan, -13.2% year-on-year, while pet diapers achieved revenue of 83.853 million yuan, or -14.1% year-on-year. Due to the inventory removal cycle of overseas customers, orders from downstream customers have been delayed, and the revenue of disposable pet hygiene products is temporarily under pressure.
Downstream customers are nearing the end of inventory removal by the end of 2023, returning to normal order placement, and orders are expected to improve marginally. Non-woven fabric revenue was 60 million yuan, +18.9% year-on-year, mainly due to the release of new non-woven production capacity. The company incorporated non-woven fabrics into the industrial chain to enhance supply chain matching capabilities, shorten delivery times and strengthen product quality control; nursing pad revenue was 13.292 million yuan, +12.9% over the same period last year. In 2024, along with the release of production capacity from the company's fund-raising project, the production capacity of the core product, pet diapers, can reach 4.6 billion tablets, and the annual production capacity bottleneck has been broken through. In 2024, the company will further optimize all aspects of existing production, storage, and sales, so as to improve overall production efficiency.
Overseas channel revenue was temporarily under pressure, and domestic sales revenue grew steadily. In terms of sales area, export revenue in 2023 was 1.24 billion yuan, -13.9% YoY; domestic sales revenue was 100 million yuan, +27.8% YoY. Looking at export channels, the company continues to maintain good cooperative relationships with major customers such as Amazon, PetSmart, and Walmart. The revenue of the top five customers in the first half of 2023 was 650 million yuan, a year-on-year decline of about 20%, mainly due to the high inventory of major customers on the Amazon channel and a decrease in new orders. The top five customers accounted for 48.7% of revenue. Major customers have resumed steady orders since 2024, and revenue is expected to continue to grow steadily throughout the year. Furthermore, the company is vigorously expanding high-quality overseas customers. The new customers are mainly supermarket chains with large overseas procurement volumes, which are expected to gradually ship and contribute to revenue growth.
In 2024, the company will continue to consolidate and expand the market share corresponding to the original customer resources, take advantage of the good opportunities of production capacity release, actively develop new international market scope and customer resources, and continuously expand the company's international market sales scale.
Profit forecasting and investment advice. EPS is expected to be 0.91 yuan, 1.10 yuan, and 1.30 yuan respectively in 2024-2026, and corresponding PE is 15 times, 13 times, and 11 times, respectively. Considering the steady demand for the company's terminals, the marginal recovery of customer orders has maintained a “buy” rating.
Risk warning: risk of increased competition in the industry; risk of large fluctuations in raw material costs; risk of fluctuating customer orders; risk of capacity release falling short of expectations.