Performance Brief
Wansheng Co., Ltd. released an interim report on 2022/8/22. The company achieved net profit of 239 million yuan in H1 in 2022, a year-on-year decrease of 44.25%. In 22Q2, net profit returned to the mother was 111 million yuan, a decrease of 13.3% over the previous month.
Management analysis
Phosphorus-based flame retardants are under pressure in the short term, and long-term development is worth looking forward to: in Q2 2022, the company's main terminal products, flame retardants, may have been affected by the epidemic. Demand for downstream terminals was weak, and sales prices fell 11.18% month-on-month. The company's production and sales volume of phosphorus-based flame retardants in the first half of 2022 was 524/50,200 tons, respectively, down 154/14,200 tons from the same period last year. The production and sales of flame retardants and gross margins may be the main reason for the narrowing of profits. In the medium to long term, with the gradual recovery of demand after the epidemic, the strict implementation of global flame retardant regulations and the continuous increase in environmental requirements will continue to drive the expansion of the downstream market size of phosphorus-based flame retardants. The long-term development of phosphorus-based flame retardants is worth looking forward to.
Deeply cultivate and increase the main business, and continue to expand the layout of the industrial chain. The company's Shandong project plans a production capacity of 319,300 tons of new functional materials, including 70,000 tons of phosphorus-based polyurethane flame retardants and 50,000 tons of phosphorus-based engineering plastics flame retardants (all BDP). The construction period of the project is 18 months, and it is expected to be completed and put into operation in the first half of 2023. At the same time, the company laid out a project in Zhongzhou, Fujian, and entered lithium-ion electrolyte additives and new conductive materials, which is expected to further enrich the layout of the company's terminal industry chain.
New material projects have been tested one after another, and the product matrix continues to be broadened: The company announced on August 9 that some production lines in the new materials project of Shandong Hanfeng New Materials Company, a wholly-owned subsidiary acquired in June, has officially entered the trial production stage. The new project involves products such as phosphorus oxychloride, phosphorus trichloride, and phosphorus pentachloride, which improve the integration of the company's products while improving the integration of the company's products, expanding the product matrix, increasing collaboration between products and continuously improving overall competitiveness.
Investment advice
The company's production and sales pace and terminal consumption sentiment have been affected by the epidemic, compounded by rising raw material costs, and performance may be under pressure. We lowered the company's 2022-2024 profit forecast by 15%/17%/12% respectively. We expect the company's net profit for 2022-2024 to be 512 million yuan/630 million yuan/810 million yuan. The corresponding EPS for 2022-2024 will be 0.88 yuan/1.07 yuan/1.37 yuan respectively, and the corresponding PE multiples 2022-2024 will be 19.27X/15.95X/12.42X respectively, maintaining the “buy” rating.
Risk warning
1. Global NEV growth falls short of expectations 2. The epidemic has repeatedly had a negative impact on the pace of terminal consumption and transportation 3. Project approval and construction progress fell short of expectations 4. Dual control of energy consumption had an impact on operating rates.
