Key points of investment:
The company announced the 2023 Annual Report and the 2024 Quarterly Report. The performance was in line with expectations, and the dividends exceeded expectations! 2023 Annual Report: Revenue of 3,976 billion yuan in 2023, up 15.7% year on year, achieved net profit of 566 million yuan, up 21.1% year on year, net profit of 528 million yuan, up 16.4% year on year; 2023Q4 single quarter revenue of 992 million yuan, up 4.7% year on year, net profit to mother of 169 million yuan, up 23.8% year on year after deducting non-net profit of 149 million yuan, up 8.8% year on year. 2024 Quarterly Report: 2024Q1 achieved revenue of 952 million yuan, up 4.1% year on year; realized net profit of 147 million yuan, up 36.6% year on year; deducted non-net profit of 145 million yuan, up 50% year on year. A cash dividend of 11 yuan is distributed for every 10 shares, with a dividend rate of 64%. The dividend rate is 4.9% according to the closing price on April 30, 2024. At the same time, 4 shares are transferred to all shareholders for every 10 shares of the capital reserve fund.
Production capacity was effectively released, sailing overseas was deployed globally, and revenue from decorative base paper grew rapidly. Revenue side: The company added 80,000 tons of production capacity and was put into operation in June 2023. The production capacity climbed rapidly. In 2023, the company achieved revenue of 3.107 billion yuan, an increase of 30.3% over the previous year. Among them, domestic/export base paper achieved revenue of 23.27/ 780 billion yuan respectively, up 21.4%/66.9% year on year, and sales of decorative base paper increased 34.2% year on year in 2023. Profit side: The gross profit margin of decorative base paper in 2023 was 23.4%, up 3.0 pct year on year. Among them, domestic/export gross margin was 21.7%/28.5%, respectively, up 2.2/4.5 pct year on year. Prices of major raw materials all declined to varying degrees in 2023. According to Zhuochuang information, the spot price of broadleaf pulp in 2023 was 5004 yuan/ton, down 21.1% year on year. According to Wind, the price of titanium dioxide in 2023 was 15,770 yuan/ton, down 11.6% year on year, while the share of high gross margin export business increased (25.1% of export sales of base paper in 2023, up 5.5 pct year on year), driving an improvement in the gross margin of decorative base paper.
Pulp prices were moderated and then increased in 2023, and the wood pulp trade achieved positive profits throughout the year. In 2023, wood pulp trade achieved revenue of 824 million yuan, a year-on-year decrease of 14.9%, gross profit margin of 3.5%, and a year-on-year decrease of 10.5 pcts. 2023H1 was affected by the rapid decline in pulp prices, and the pulp trading business experienced losses, but with the gradual steady recovery of pulp prices in the second half of 2023, wood pulp trade profits gradually improved. Currently, pulp prices continue to rise. According to Zhuochuang information, the average price of wood pulp in 2023Q4/2024Q1/2024Q2 is 5,309/5184/5,601 yuan/ton, respectively. It is expected that the profit of wood pulp trade will improve sequentially in 2024Q2.
The share of high-margin decorative paper business increased, driving continuous improvement in profitability. The company's net interest rate in 2023 was 14.2%, up 0.7 pct year on year. Among them, the net interest rate for single Q4 was 17.1%, up 2.7 pct year on year, up 2.8 pct month on month; 2024Q1 net interest rate was 15.4%, up 3.7 pct year on year. 1) The company's gross margin continued to increase: the company's gross margin in 2023 was 19.0%, up 0.6 pct year on year, of which single Q4 gross margin was 22.1%, up 4.6pct year on year, up 1.5pct month on month; 2024Q1 gross margin was 20.2%, up 6.1 pct year on year, mainly due to improved gross margin of decorative base paper, and increased share of high-margin base paper and export business; 2) The company's expense ratio was relatively stable during the 2023 period: the company's expense ratio was 3.7%, up 0.3 pct year on year, of which single Q4 increased 0.3 pcts year on year, including single Q4 The cost rate for the period was 3.9%, up 1.6 pct year on year, down 1.1 pct; the 2024Q1 period cost rate was 4.0%, up 2.5 pct year on year; looking at the spin-off, the company's 2023 sales/management/ R&D/finance expenses rates were 0.6%/1.3%/3.0%/-1.3%, respectively, with year-on-year changes of +0.0/-0.1/+0.3/+0.0pct; in a single 2023Q4 company's sales/management/R&D/finance expenses rates were 0.7%/1.8%/3.5% /-, respectively 2.1%, year-on-year change of -0.1/-0.4/+1.2/+0.9pct; 2024Q1's sales/management/R&D/finance expense ratios were 0.4%/0.9%/2.9%/-0.3%, respectively, with year-on-year changes of +0.0/-0.2/+1.0/+1.7pct, respectively.
The company is a leading enterprise in the middle and high-end decorative base paper industry. It has outstanding technology research and development capabilities, strong supply chain organization and management capabilities, leading the industry in profitability. The production capacity of decorative base paper continues to expand, and sales capacity in overseas markets is full. The order status is full, and endogenous growth momentum is sufficient; capital expenditure is gradually slowing down, dividend rates are increasing, and high-quality, low-fluctuating and high-dividend assets. Maintaining the 2024-2025 profit forecast of 689/902 million yuan, adding a 2026 profit forecast of 956 million yuan, and a year-on-year increase of 21.7%/30.9%/6% in 2024-2026, respectively. The current market value corresponding to 2024-2026 PE is 11X/8X/8X, respectively, maintaining the “buy” rating.
Risk warning: Pulp prices continue to rebound, and demand for decorative base paper weakens.