Revenue increased steadily in the first quarter, and net profit increased 45.2% year-on-year due to higher gross margin and lower expense ratios. In 2023, when downstream inventory was generally high and demand was under pressure, the company still achieved positive performance growth; in the first quarter of 2024, the double-digit growth trend of orders and shipments continued, achieving operating income of 80 million yuan, +14.8% year over year; net profit to mother was 80 million yuan, or 45.2% year over year. Gross margin increased slightly by 0.2 percentage points to 37.9%, which is expected to benefit mainly from declining raw material prices, changes in product structure, and increased production efficiency driven by scale effects and intelligent manufacturing.
Financial expenses were reduced by the contribution of exchange earnings, and profit margins increased significantly. The total expense ratio decreased by 2.3 percentage points year on year, with the management expense ratio increasing by 0.5 percentage points; sales and financial expense ratio control decreased by 0.4 and 2.8 percentage points respectively. The decline in financial expenses mainly contributed to the increase in exchange income and interest income. Operating profit margin and net interest rate to mother increased by 4.2 and 2.0 percentage points, respectively.
Operational efficiency improved year on year, and the number of inventory turnover days decreased by 4 days year on year. Capital expenditure increased 94.9% year over year to 189 million yuan, maintaining a positive pace of capacity expansion in the face of adversity.
All categories and domestic and foreign businesses grew steadily in 2023, and Bangladesh's capacity utilization rate increased significantly. By category, revenue from zippers/ buttons/ other clothing accessories in 2023 was +6.8%/+9.0%/+8.8%, respectively. Among them, zipper and button revenue growth was driven by volume and price; among other accessories, the ribbon business is expected to grow faster. Mainly benefiting from changes in product structure and declining raw material prices, the gross margin of zippers and buttons increased by 3.0/1.0 percentage points respectively. Looking at the subregion, the company is accelerating the layout and transformation of the international market, speeding up the construction of industrial parks in Vietnam, improving the management efficiency of industrial parks in Bangladesh, and providing a strong guarantee for the expansion of the international market. Domestic and foreign revenue in 2023 were +7.2% and 8.7%, respectively, and gross margin increased 1.8% and 2.2%, respectively. In terms of production capacity, domestic and overseas (mainly Bangladesh) accounted for 85% and 15%, respectively; the capacity utilization rate in Bangladesh increased significantly, and the capacity utilization rate of domestic and Bangladeshi factories increased 3.0 and 10.9 percentage points year-on-year in 2023, respectively.
Risk warning: Production capacity expansion falls short of expectations; inventory removal process falls short of expectations; international political and economic venture capital advice: optimistic about the company's medium- to long-term share expansion potential, and focus on opportunities for this year's boom recovery. In 2023, when downstream demand was generally weak, the company continued to expand against the trend and was superior to industry orders, showing strong competitive strength. The first quarter of 2024 continued its good growth momentum, and as downstream warehousing came to an end, we are optimistic about a further recovery in industry sentiment and the company's order growth rate. We maintain our profit forecast for the company. We expect the company's net profit for 2024-2026 to be 6.5/7.5 billion yuan, up 16.9%/15.2%/10.5% year-on-year, maintaining a reasonable valuation range of 12.7 to 13.3 yuan, corresponding to 23-24x PE in 2024, and maintaining a “buy” rating.