Incidents:
On the evening of August 30, the company released its 2022 semi-annual report. During the reporting period, the company achieved revenue of 3.478 billion yuan, a decrease of 4.62% over the previous year; achieved net profit of 651 million yuan, an increase of 10.15% over the previous year; and achieved net profit of 638 million yuan after deduction, an increase of 8.36% over the previous year. In Q2 2022, the company achieved revenue of 1,707 million yuan, a year-on-year decrease of 12.97% and a decrease of 3.58% from the previous month; it achieved net profit of 201 million yuan, a decrease of 44.06% from the previous year and a decrease of 55.39% from the previous month.
The 22H1DMC series solvent continued to be released, and the 22Q2 solvent price decline performance was temporarily under pressure, benefiting from the rapid development of the new energy industry, and the company's DMC series solvent products were steadily released. 2022H1, the company's DMC series product sales increased 21.0% year on year to 184,400 tons, of which 202Q2 achieved sales volume of 102,200 tons in a single quarter, up 29.1% year on year and 24.5% month on month. In terms of sales revenue, 2022H1 and the company's DMC series products achieved revenue of 2,225 billion yuan, an increase of 15.4% over the previous year. However, the sales price of the company's DMC series products declined sharply in 2022Q2, which temporarily put pressure on the 2022Q2 related business performance.
The average price of 2022Q2's DMC series products was about 9629 yuan/ton, down 26.9% year on year and 36.4% month on month. Affected by the decline in DMC series product prices, 2022Q2's DMC series product revenue was 983 million yuan, down 5.7% year on year and 20.8% month on month.
On the MTBE side, the decline in H1 domestic demand in 2022 was mainly due to the frequent spread of the epidemic in some parts of the country, and weak demand for gasoline raw materials such as gasoline and MTBE. However, since April, with the rapid depreciation of the RMB and strong demand for high-octane oil from overseas, overseas export orders have increased rapidly, and demand for 2022Q2 has rebounded month-on-month. Affected by weak demand in 2022H1, 2022H1's MTBE sales fell 65.9% year on year to 810,000 tons, and business revenue fell 49.9% year on year. 2022Q2 Due to an improvement in downstream demand, the company achieved MTBE sales volume of 45,700 tons in Q2 in a single quarter, an increase of 29.5% over the previous quarter. In terms of prices, driven by a sharp rise in the prices of petrochemical raw materials such as upstream crude oil, the average price of MTBE products of 2022H1 company increased 46.7% year-on-year.
It is proposed to raise 4.5 billion yuan to expand the production capacity of lithium battery materials and create a one-stop supporting service supply platform. The company adheres to the development strategy of focusing on the electrolyte and new materials business. Currently, it also has 5 kinds of electrolyte solvents, lithium hexafluorophosphate of lithium salt, lithium difluoroborate, fluorobenzene, etc., forming a comprehensive one-stop supporting service supply platform. At the same time, the company is also vigorously promoting the landing of new bases and project layout, and continuously optimizing the industrial layout. At present, the company's 440,000 tons/year new energy materials project (phase I) in Quanzhou, 120,000 tons/year EC equipment, 100,000 tons/year DMC equipment, and 40,000 tons/year battery-grade EC refining projects have all been successfully put on the market, and other projects under construction are progressing smoothly.
On July 15, the company announced a plan for the non-public offering of A-shares in 2022. The company plans to raise 4.5 billion yuan to build seven new capacity projects including electrolytes, electrolyte additives, wet electronic chemicals, and silicon-based anode materials. The total investment in related capacity projects is about 6.5 billion yuan, and it is proposed to use fundraising funds of 3.95 billion yuan. In terms of raising electrolyte production capacity, the company plans to build a 300,000 tons/year electrolyte project in Dongying, with an investment of about 1.6 billion yuan. It is expected to be completed and put into operation in February 2023. The company also plans to build a 200,000 tons/year electrolyte project in Wuhan, with an investment of about 1,224 billion yuan. It is expected to be completed and put into operation in October 2023. In addition, the company announced on the evening of June 16 that it intends to establish a wholly-owned subsidiary Shenghua New Energy Technology (Meishan) Co., Ltd. and invest in the construction of 200,000 tons/year of electrolyte and supporting projects, including 200,000 tons/year of electrolyte plants, 100,000 tons/year DMC plants, 50,000 tons/year of EMC installations and supporting utilities. The electrolyte and supporting materials construction project at the Meishan base is currently not part of the company's current fixed capital raising project. The total investment of the project is about 2.15 billion yuan. It is expected to be completed and put into operation in December 2023.
In terms of raising solvent production capacity, the company plans to deploy 220,000 tons/year lithium battery material production and R&D integrated project at the Wuhan base, including 120,000 tons/year EC, 50,000 tons/year DMC, and 50,000 tons/year EMC. The total investment of the project is 1,243 billion yuan. It is expected to be completed and put into operation in June 2023. In terms of raising electrolyte additives and electrolyte production capacity, the company has deployed 11,000 tons/year additive project and 100,000 tons/year liquid lithium salt project at the Dongying base, respectively. The project investment amounts are 356 million yuan and 611 million yuan respectively. It is expected to be completed and put into operation in December and February 2023, respectively.
At the same time, the company is also further developing new lithium battery material categories and other new material products through this fund-raising project. The total investment of the 30,000 tons/year silicon-based anode project at the Meishan base is 1,102 billion yuan. It is expected to be put into operation in April 2024. In addition to fund-raising projects, the company also has production capacity for new products such as 20,000 tons/year of lithium supplements, 10,000 tons of fluorinated solvents, and 10,000 tons/year of new conductive agents. These new product projects are expected to be put into operation in February 2024. In terms of raising production capacity for wet electronic chemicals, the company's Dongying base has an annual output of 50,000 tons of wet electronic chemicals project. The first phase is to build 5,000 tons/year of high-purity hydrogen peroxide, 5,000 tons/year of high-purity ammonia, 5,000 tons/year of high-purity ammonia, 5,000 tons/year of high-purity ammonia, 4 5,000 tons/year of photoluminized resin auxiliary materials production lines. It is expected to be put into operation in December 2022. The second phase will build 5,000 tons/year of high-purity hydrofluoric acid, and 2 5,000 tons/year high-purity organic reagent production lines, with a total project investment of 372 million yuan. Production starts on a month.
An electrolyte production agreement was signed with Enchem to deeply bind high-quality customers. On August 25, 2022, the company announced that its wholly-owned subsidiary Shenghua New Energy Technology (Dongying) and ENCHEMCO. , LTD. signed a “Strategic Cooperation Framework Agreement”, and Enchem commissioned Shenchem to produce electrolytes. The agreement is valid from August 1, 2022 to December 31, 2025. Enchem, an internationally renowned electrolyte manufacturer, has always been one of the company's main customers for carbonate solvents. Signing a framework agreement can further deepen the company's cooperation with Enchem in the field of electrolytes and solvents, fully guaranteeing the company's future performance.
Profit forecasts, valuations and ratings: Along with strong demand for lithium batteries and materials in fields such as new energy vehicles, 2022H1 continues to release DMC series solvent products. However, due to the decline in the price of DMC series products, the company's 2022Q2 performance was temporarily under pressure and fell short of previous expectations. Considering the decline in the price of DMC, the company's main product, we lowered the company's 2022-2024 profit forecast. The company's net profit for 2022-2024 is estimated to be 13.47 (down 12.4%) /16.81 (down 12.5%) /22.13 (down 8.9%), respectively. The company continues to expand its electrolyte production capacity plan and actively expand its range of lithium battery materials. On the one hand, it will strengthen its influence in the field of lithium battery materials, and on the other hand, it will fully benefit from the rapid development of the new energy sector. We will maintain the company's “buy” rating.
Risk warning: production capacity construction falls short of expectations, downstream demand falls short of expectations, and the risk of price fluctuations of products and raw materials.
