Event: on October 28, the company released its quarterly report for 2022, with realized income (3.032 billion yuan, + 15.76%), return net profit (- 89 million yuan,-6745.07%), non-return net profit (- 36 million yuan,-1553.05%). The income realized in the third quarter (1.169 billion yuan, + 24.39%), the net profit returned to the mother (6.199 million yuan, + 115.72%), and the non-return net profit (51.628 billion yuan, + 113.88%).

In the first three quarters, due to the impact of the 22H1 epidemic, the company's production reduction was insufficient, resulting in a large year-on-year increase in related raw materials and energy prices and higher costs, resulting in pressure on the performance side, but revenue improved in the third quarter and net profit turned into profit, and it is expected to be further improved in the fourth quarter.

During the reporting period, the company focused on the production and sales of chemical fiber, including viscose filament, viscose staple fiber and carbon fiber. In the first three quarters of 2022, the company achieved revenue of 3.032 billion yuan, an increase of 15.76% over the same period last year, or related to the increase in volume and price of viscose filament products in the first half of the year; the net profit of returning to the mother was-89 million yuan, down 6745.07% from the same period last year, mainly due to the reduction of production by the company due to the epidemic and the increase in the price of raw materials at the cost end. The account of non-operating expenses in the first three quarters was accounted for 81.6544 million yuan, an increase of 1304.59% over the same period last year, mainly due to the loss of production caused by the epidemic.

In terms of profitability, the company's gross profit margin in the first three quarters was 7.86%, down 4.55pct from the same period last year, due to rising prices of raw materials, chemical accessories and energy. In the first three quarters, the net interest rate was-2.76%, down 2.8pct from the same period last year, but the net profit rate was less than the gross profit margin, which was mainly related to the decrease of 3.52pct to 8.10% year-on-year expense rate during the period, in which the financial expense rate decreased by 2.98pct compared with the same period last year. According to the 22 mid-year report, mainly due to the reduction of financial expenses by 29.99 million yuan in exchange gains and losses, the sales expense rate decreased by 0.29pct and the management expense rate decreased by 0.28pct.

From a quarterly point of view, the performance in the third quarter improved significantly. Q1-Q3 achieved revenue of 9.37 million yuan, 9.26 million yuan, and Q3 increased by 26.24%, which was higher than the revenue growth rate of the previous three quarters, or because of viscose staple fiber processing, the negative impact of the epidemic subsided, and the company's production and operation gradually returned to normal. The company achieved a net profit of-0.49 million yuan, Q3 turned losses into profits, and profitability was in a marginal trend. In the first three quarters, the gross profit margin was 9.44%, 6.27%, 7.86%, respectively, and the gross profit margin increased by 1.59pct compared with the previous quarter, and the gross profit margin showed a steady upward trend; the net profit margin was-5.23%, 4.85%, 0.88%, 0.88%, respectively, and became a regular employee for the first time since the third quarter of last year. We expect that as the company's production and business activities gradually get back on track, Q4 performance is expected to usher in further improvement.

The prosperity of the carbon fiber industry is rising, and the company is actively transforming to meet new opportunities for development. The 14th five-year Plan

It is the critical period of carbon peak. In recent years, the scale of renewable energy such as wind power, photovoltaic and hydrogen energy in China continues to expand, and the demand for carbon fiber in related fields is strong. According to Saio carbon fiber, the global carbon fiber consumption in 2030 is expected to exceed 400000 tons. The company's existing subsidiaries Jilin Camecker (shareholding ratio 100%) and Jilin Baodi (49%) are the forerunners of the extension of the carbon fiber field, of which the wholly-owned subsidiary Cameck is mainly composed of 1K and 3K small tow. At present, the annual production line of 600t has been completed and reached production capacity. Jilin Baoji has the R & D, production and sales capacity of 25-50K tow with a production capacity of 8000 tons per year. In addition, Guoxing carbon Fiber, a wholly owned subsidiary of Jilin Chemical Fiber Group, is mainly engaged in the production and sales of large tow carbon fiber, and there are 15000 tons of carbon fiber project under construction this year. The group has publicly promised to complete the injection of Guoxing carbon fiber control shares into listed companies within three years, which will effectively supplement the company's large tow carbon fiber production capacity and further strengthen the company's competitive advantage.

Downstream wind power demand is improving, fund-raising projects contribute to performance growth. In November 2021, the company issued a non-public offering plan to raise no more than 1.2 billion yuan for the construction of 12000 tons of carbon fiber composite project and bank loan repayment, of which 900 million yuan is intended to be used for 12000 tons of carbon fiber composite project. On July 11, 2022, the Dingzeng project landed successfully. according to the company announcement, the fund-raising project is mainly for the production of carbon fiber pultruded plates using pultrusion technology, and the products are mainly used for the production of wind power blades. The use path is carbon fiber-pultrusion molding-carbon plate, and then directly into the large assembly link of the blade. After completion, the annual income is expected to reach 1.54 billion yuan. The landing of this additional project will help the company to make a full layout in the wind power field, and is expected to further contribute to the company's future performance growth.

Investment suggestion: as the leader of viscose filament, the company has a solid position in the traditional business. At the same time, relying on the advantages of industrial clusters, the company is actively distributing the business of new carbon fiber materials. With both technological advantages and production advantages, the company is expected to become a leading enterprise of large tow carbon fiber. Taking into account the upward prosperity of the carbon fiber industry, we expect the company's net profit from 2022 to 2024 to be 0.5,2.2 and 350 million yuan respectively, with corresponding valuations of 228X, 51x and 33x respectively, maintaining the "buy-A".

Rating.

Risk tips: viscose filament demand is lower than expected; carbon fiber production is not as expected; wind power, photovoltaic, hydrogen energy and other industries are not as expected.