Incident: The company released its 23 annual report and its quarterly report for '24. It achieved revenue of 39.544 billion yuan and 10.185 billion yuan, with year-on-year changes of -0.56% and +3.87%; realized net profit to mother of 30.86 billion yuan and 956 million yuan, up 9.86% and 69.04% year-on-year, achieving net profit of 30.27 and 952 million yuan, up 9.22% and 72.22% year-on-year, with basic earnings per share of 1.10 and 0.34 yuan.
Q1 profit continued to increase month-on-month: 4Q23/1Q24 achieved operating income of 103.42/10.185 billion yuan, up 2.13%/3.87% year on year, and realized net profit of 949/956 million yuan, up 75.51%/69.04% year on year. 1Q24 revenue increased slightly year on year, and profit continued to increase month-on-month. In 23, a total of 6.66 million tons of paper products were sold, up 19.57% year on year. Mainly due to the successive commissioning of new papermaking projects, 1.46 million tons of pulp, a year-on-year decrease of 20.65%, not including internal consumption.
Profit margin increase from 23 to 1Q24: The gross profit margin of the company's pulp and paper products was 15.49% in 2023, up 0.71 pct year on year, and the gross margin of uncoated cultural paper/ coated paper/ box board paper/ dissolved pulp was +0.07/-2.25/+4.52/-6.61 pct, respectively. In terms of the cost ratio for the period, the sales expense ratio increased by 0.01 pct to 0.39% year on year, the management expense ratio decreased by 0.18 pct to 2.42% year on year, the R&D expense ratio increased 0.39 pct to 2.35% year on year, and the financial expenses ratio decreased by 0.18 pct to 1.92% year on year, mainly due to reduced interest expenses. Under the combined influence of reduced interest expenses, the company's net interest rate increased 0.76 pct to 7.84% year on year, and the gross profit margin for 1Q24 increased 17.99%.
The new construction project was successfully put into operation. It is planned to implement the second phase of Nanning: the company's total production capacity of pulp and paper exceeded 12 million tons in '23. The Nanning PM1 specialty cultural paper project, the PM1/PM2 high-grade wrapping paper project, and the supporting natural chemical paste project were successfully put into operation. The first phase of the 300,000 ton household paper project is expected to enter trial production in the 3rd quarter of '24. In April '24, the company plans to implement the second phase of the Nanning project, including a 400,000-ton specialty paper production line, a 350,000-ton bleached chemical wood pulp production line, and a 150,000-ton mechanical wood pulp production line, with an estimated total investment of no more than RMB 7 billion.
Profit forecast and rating: We expect the company's net profit for 24-25 to be 36.69 billion yuan and 4.194 billion yuan respectively, with year-on-year growth rates of 18.9% and 14.3%. The closing price on May 21 corresponds to the 24-25 PE of 11.9 and 10.4 times. Refer to the comparable company giving the company a PE valuation of 13 to 14 times in 24 years, corresponding to a reasonable value range of 17.03 to 18.34 yuan, giving a “superior to the market” rating.
Risk warning: Downstream demand is weak, and raw material prices fluctuate greatly.