Incident 1: On the evening of April 28, the company released its 2021 annual report. During the reporting period, the company achieved revenue of 6.717 billion yuan, +17.67% year on year; achieved net profit of 352 million yuan, -12.54% year on year, and net profit returned to the mother after deduction of 338 million yuan, -9.94% year on year. 2021Q4 achieved revenue of 1,729 million yuan, -3.75% year-on-year, -7.59% month-on-month; it achieved net profit of 159 million yuan, +63.5% year-on-year and +44.55% year-on-month.
Incident 2: On the evening of April 28, the company released its 2022 quarterly report. During the reporting period, the company achieved revenue of 1,340 million yuan, a year-on-year decrease of 3.06%; achieved net profit of 100 million yuan, an increase of 95.08% over the previous year, of which the net profit returned to the mother after deduction was 93 million yuan, an increase of 104.17% over the previous year.
The 21-year results were basically in line with expectations, and the company's gross margin picked up in 22Q1. Benefiting from increased product sales, the company's revenue scale grew steadily in '21, and its performance was basically in line with expectations. The main product, polycarboxylic acid water reducing agent polyether, sold 795,900 tons per unit in '21, +20.19% year on year, and sales revenue +20.89% year on year. Benefiting from strong demand in the downstream new energy industry, the company achieved sales of 26,800 tons of lithium battery electrolyte solvent additives in '21, with a gross profit of 125 million yuan. However, due to the sharp rise in international oil prices and the increase in the procurement cost of the company's main raw material, ethylene, the company's gross margin in 2021 was -3.60 pct year-on-year. The company's profitability improved in Q1 '22, and gross margin rebounded to 11.08% in a single quarter, +2.26pct compared to the previous year.
The new energy materials industry is booming, and the company's carbonate products are developing well. The market for electrolyte solvents for new energy vehicle power batteries is developing rapidly, and high-end demand for carbonate products has increased dramatically. The company's carbonate series products are epoxy-derived green and low-carbon products, mainly including vinyl carbonate (EC), dimethyl carbonate (DMC), etc. The current production capacity is 26,000 tons/year, and the capacity utilization rate is as high as 107%. At the same time, the company has established a strategic partnership with Sinochem Blue Sky Group Co., Ltd. to actively explore overseas markets.
The company is the single champion manufacturer of polyether, a water-reducing agent in China, and continues to expand the application of pharmaceutical products. The company has formed a complete industrial chain of “ethylene-ethylene oxide - derivatives”. Currently, the leading product, polyether monomer, has a production capacity of 850,000 tons/year, accounting for about 40% of the market share in major domestic sectors, with a production capacity of 300,000 tons under construction. The current production capacity of ethylene oxide is 300,000 tons/year, with a strategic layout of 1.6 million tons of ethoxylation capacity. Furthermore, the company continues to expand in the pharmaceutical field. The company currently has a production capacity of 10,000 tons of pharmaceutical polyethylene glycol, and is also constructing a 2,800 tons/year food and pharmaceutical grade polysorbate (80) project.
Profit forecast, valuation and rating: The company's 2021 performance is basically in line with expectations, but considering that the current price of raw materials is still at a high level, we lowered the company's profit forecast for 22-23 and increased the profit forecast for 24. It is estimated that the company's net profit for 22-24 will be 4.41 (down 21.0%) /5.35 (down 42.8%) /647 million yuan respectively. The company has a corresponding production capacity layout in the fields of new energy materials and medical materials, has broad scope for overall growth, and maintains the company's “buy” rating.
Risk warning: risk of fluctuations in raw material prices, downstream demand falling short of expectations, risk of production capacity construction.