COFCO Sugar's 2023 annual report has been released - it is time for "boring" financial statement analysis again. Since last year, I have basically read the quarterly, semi-annual and annual reports of COFCO Sugar, because I think that a qualified value investor, pressing the calculator is the basic skill, and reading the financial report is a compulsory course.
First, production and sales
Looking at COFCO Sugar's 2023 annual report, the most important information is operating income. In 2023, COFCO Sugar will achieve a main business income of 32.938 billion yuan, an increase of 24.60% year-on-year, mainly contributed by sugar and tomato paste.
In terms of production, the output of self-produced sugar in 2023 is almost the same as that in 2022, with little change. Sales volume involves the increase or decrease of inventory levels, and although it has an impact on revenue, it is difficult to accurately predict. The production of ketchup has achieved a good increase, with an increase of 17.56%.
2. Operating income
In terms of operating income, the accounting method for processed sugar in 2023 has changed compared to 2022. Part of the sales revenue of the original "processed sugar" was included as "trade sugar", which increased the operating income contribution and gross profit margin of "trade sugar". This time, part of the sales revenue of "processed sugar" was adjusted from "trade sugar" to "processed sugar", and the operating income contribution and gross profit margin of "processed sugar" both increased.
Self-produced sugar and processed sugar, in fact, can be considered as a whole, these two add up to about 20 billion yuan of revenue, ketchup (mainly self-operated) Although the gross profit margin is high, 44.93%, but the revenue scale is only 2.642 billion yuan, about 10% of sugar revenue. Therefore, the analysis of COFCO Sugar should still focus on sugar.
From the perspective of production and sales, the output of sugar in 2023 is actually not much different from that in 2022, so the significant increase in revenue is mainly due to the increase in sugar prices.
According to the data provided by the business community, the annual average price of white sugar in 2022 will be 5,795 yuan/ton, and the annual average price in 2023 will be 6,817 yuan/ton, an increase of 17.6% year-on-year. In the same period, the total revenue of COFCO Sugar's sugar business was about 30 billion yuan, an increase of 23.4% year-on-year, which was basically the same as the increase in sugar prices. This shows that sugar prices are the main reason for the growth of COFCO Sugar's revenue.
3. Long-term outlook
If the price of white sugar can be maintained at a high level, then COFCO Sugar's sugar revenue can be flat year-on-year at a high level, combined with the continuous and stable growth of the ketchup business, then COFCO Sugar's overall revenue can achieve stable growth.
Some people say that the Federal Reserve is about to start expanding its balance sheet and cutting interest rates, and commodities are about to usher in a big bull market, which seems to constitute macro support for commodities to maintain a high level.
In the final analysis, the core factor supporting commodity prices is supply and demand, and monetary policy can affect demand, but whether it can detonate commodity prices depends on supply - I am afraid that in 2024, sugar will be a bumper year.
"Take a step, look at a step" is sometimes the norm for cyclical stocks, and everyone should get used to it! Therefore, I rarely predict commodity prices, and I generally only enter the market under the protection of a sufficient "margin of safety".