Incident 1: On August 9, the company released its 2022 semi-annual report. In the first half of 2022, the company achieved revenue of 2.4 billion yuan, an increase of 13.18% over the previous year; achieved net profit of 47 million yuan, a decrease of 46.16% over the previous year; and achieved net profit of 38 million yuan after deduction, a decrease of 44.69% over the previous year. 2022Q2 achieved revenue of 1,103 billion yuan, an increase of 1.16% over the previous year and a decrease of 15.04%; it achieved net profit of 22 million yuan to the mother, an increase of 79.93% over the previous year and a decrease of 9.47% from the previous month.
Incident 2: On August 8, the company announced that it had completed the transfer of assets that were the subject of major asset purchases. The company purchased 79.7883% of Hystar Power's shares held by Hystar Group by means of cash payment. The transfer consideration was 1,1409.773 million yuan. After this equity transfer is completed, the company has the right to increase its capital to Haistar Power by no more than 800 million yuan to invest in two projects, the second phase of the Hi-SiDa power supply high-energy high-safety power lithium-ion battery and power system, and the first phase of the 12GWh square lithium-ion battery project with an annual output of 12 GWh (annual output of 6 GWh).
Comment:
The performance of rising raw material prices is still under pressure, and the LCP business is expected to break through. Benefiting from the release of the modified polyolefin and modified engineering plastics business, 2022H1 maintained positive growth in its overall revenue. Among them, the revenue of the modified polyolefin and modified engineering plastics business increased 13.94% and 27.22% year-on-year, respectively. However, since upstream raw material prices are still high, the company's gross margin level is still at an all-time low. The gross profit margin of 2022H1 is about 12%, which is basically the same as 2021H1. Compared with 2020H1, it declined by about 14.94 pct. The company currently has a production capacity of 400,000 tons/year of modified plastics, 2,000 tons of LCP resin polymerization capacity, a 3 million square meter LCP film production line, and a production capacity of 150 tons (200D) of LCP fiber. At the same time, it is also building resin polymerization and extrusion capacity for the second phase of the Jinshan Plant. The LCP business is expected to break through in 2022. Among them, LCP modified materials have been supplied in batches to major domestic and foreign customers, fibers have been approved and mass-produced and supplied by international customers, films have been tested and approved by downstream customers, and will soon be delivered in batches.
The transfer of Hystar Power's assets has been completed, and the continuous expansion of lithium battery production capacity has created a second growth curve. As of August 8, the transfer procedures for the underlying assets related to Haishida Power have been completed, and the company already holds 79.7883% of the shares of HiSida Power. In the future, the company has the right to further increase its capital to HiSida Power by 800 million yuan, thereby increasing its shareholding ratio to 87.0392%. By the end of 2021, Highstar Power had a production capacity of 508.2 million Ah/year for ternary cylindrical lithium-ion batteries and 371.25 million Ah/year for lithium ion iron phosphate batteries. In the future, the company will further expand the production capacity of Haishida Power's lithium batteries through fixed capital increases. According to the company's fixed increase plan, the company plans to raise 2.2 billion yuan of capital through a fixed increase, of which 800 million yuan will be used for the first phase of the 12GWh square lithium-ion battery project (annual output of 6 GWh, investment amount of 1.33 billion yuan, capital raised of 600 million yuan) and the second phase project with an annual output of 2 GWh high-efficiency high-safety power lithium-ion batteries and power systems (investment amount of 500 million yuan, capital raised). The construction cycle of the previous project was about 18 months. After completion, it is expected to achieve an average annual revenue of 4.64 billion yuan and an average annual net profit of 353 million yuan; after completion, the construction cycle of the latter project is about 1 year. After completion, it is expected to achieve an average annual revenue of 980 million yuan and an average annual net profit of 103 million yuan.
Profit forecast, valuation and rating: Due to the high price of raw materials, the company's original business performance fell short of expectations, but considering that the assets related to Hystar Power have already been transferred, the company's profit forecast for 2022-2023 was raised, and the profit forecast for 2024 was added (note: the increase in performance brought about by related new fund-raising projects is not taken into account yet). The company's net profit for 2022-2024 is expected to be 2.16 (up 10.3%) /3.96 (up 34.4%) /500 million yuan respectively. After the acquisition of Hystar Power is completed, the company will officially enter the new energy battery industry, create a new growth curve, and maintain the company's “increase in holdings” rating.
Risk warning: Product and raw material prices fluctuate, production capacity construction falls short of expectations, downstream demand falls short of expectations, customer verification risks.
