Core views:

Yutong Technology released its annual report for the year 23 and the quarterly report for the year 24. In 2023, the company achieved revenue of 15.223 billion yuan, -6.96% year-on-year; net profit to mother was 1,438 billion yuan, -3.35% year-on-year. On a quarterly basis, 23Q4/24Q1 achieved revenue of 4.416/3.476 billion yuan, respectively, +2.10/ +19.37% year on year; realized net profit to mother of 4.53/219 billion yuan, -3.44/ +20.55% year on year, with significant performance recovery.

The revenue side is under slight pressure, and the profit side continues to recover. By product, in '23, the company achieved revenue of 110.36/10.64/ 2,614 billion yuan respectively, or -6.58%/-4.73%/-7.89% compared with the same period last year. Overall consumption recovered slowly in '23, and all of the company's businesses are in an adjustment period, and it is expected to continue to recover in '24. On the profit side, the gross margins of the company's fine paper packaging, environmentally friendly paper and plastic products, and packaging supporting products were 26.73%/22.15%/24.70%, respectively, with year-on-year changes of +2.74/ -0.93/+ 3.12pct.

Production capacity expanded at an accelerated pace, and repurchases showed long-term confidence. In '23, the company's new plant in Malaysia passed customer certification and was successfully put into operation, effectively supporting customer service needs in the local market; the construction and commissioning of the new eco-friendly packaging plant in Vietnam protected the international development of the eco-friendly packaging business. According to the repurchase announcement issued by the company, according to the upper limit of the repurchase amount, the company expects to repurchase about 5.31 million shares, accounting for 0.57% of the total issued share capital. Based on the lower limit of the repurchase amount, the estimated number of shares to be repurchased is about 2.65 million shares, accounting for 0.29% of the company's total issued share capital. The company is actively buying back, demonstrating confidence in long-term development.

Profit forecasting and investment advice: The company is a leading packaging enterprise with multi-faceted and differentiated core capabilities integrating quality, service, solutions, innovation, cost and brand. It is expected that through an increase in the supply share of core customers, the company will continue to be resilient in revenue and profit under pressure from industry demand. EPS for 24-26 is estimated to be 1,86/2.19/256 million yuan. Referring to comparable companies, a reasonable valuation of 15 times PE for 24 years is given, corresponding to a reasonable value of 27.92 yuan/share, maintaining a “buy” rating.

Risk warning: Raw material prices fluctuate, customer growth falls short of expectations, and the competitive landscape of the industry intensifies.