Incidents: The company released its 2022 annual report. It achieved revenue of 605 million yuan for the year 22, an increase of 3.49% over the previous year; Guimu's net profit was 47 million yuan, an increase of 33.33% over the previous year; Q4 alone achieved revenue of 127 million yuan, a year-on-year decrease of 19.06% and a decrease of 28.11% over the previous year; Guimu's net profit was 0.05 million yuan, a year-on-year decrease of 24.48% and a decrease of 75.80% over the previous year.
1. 2022: Production capacity expanded steadily, and downstream demand declined due to the epidemic
Production side: As of the 2022 annual report, the company has an operating capacity of 40,000 tons of “two-step” pure polylactic acid, another 20,000 tons of commissioning and rectification, and 150,000 tons of production capacity under construction. In 2022, the company produced 25,900 tons of pure polylactic acid, an increase of 6.26% over the previous year, with a corresponding capacity utilization rate of 65%. Of these, 191,000 tons were used to produce composite modified polylactic acid; a total of 13,900 tons of composite modified polylactic acid were produced, an increase of 17.95% over the previous year;
Sales side: The company sold 16,900 tons of pure polylactic acid, an increase of 21.39% over the previous year; 12,500 tons of composite modified polylactic acid, an increase of 7.9% over the previous year. According to the company's annual report, due to the influence of the external environment, downstream consumer demand declined, and overall consumption of bioplastics was reduced, so the annual revenue increase was not significant. In 2022, the company's market share of polylactic acid increased in straws, film bags, etc., which led to an increase in sales of pure resins. Application fields such as household goods, disposable tableware, and 3D consumables were affected by factors such as a decline in foreign sales markets and uncertain policies on degradable materials in Europe and Australia, which led to a decline in export demand, a decline in product prices, and a decline in revenue from modified resins.
Profit side: Company 1) Pure polylactic acid: segment revenue was 354 million yuan, an increase of 8.88% over the previous year, and the unit price was about 21,000 yuan/ton; the cost per ton was 306 million yuan, an increase of 13.33% over the previous year, and the cost per ton was about 18,100 yuan/ton; gross profit margin 13.62%, compared to the previous year -3.39 pct; 2) Composite modified polylactic acid:
Segment revenue was 237 million yuan, down 5.09% year on year, unit price was about 19,000 yuan/ton; segment cost was 204 million yuan, down 4.92% year on year, and the cost per ton was about 16,300 yuan/ton; gross profit margin was 14.01%, compared with -0.15pct the previous year; 3) Primary products: segment revenue was 0.062 million yuan, up 41.42% year on year; gross margin was 6.79%, up 47.57% year on year; gross margin was 6.79% over the previous year.
2. After 2023, downstream demand is rapidly recovering in the catering, aviation and express delivery markets!
As a bio-based biodegradable plastic with superior performance, polylactic acid has been widely used by companies around the world in many downstream products and fields such as packaging, food containers, and tableware. In recent years, China has continued to step up its “plastic ban” and “plastic restriction” policies in the fields of catering & takeout, civil aviation, express delivery, etc. We believe that with the rapid recovery in demand after the pandemic, the company's 2023 performance may significantly benefit from the accelerated recovery in these three areas.
Profit Forecast & Investment Suggestion: Since the company's Heinor Phase II 20,000 ton production capacity was still being adjusted in early '23, we lowered the 23-24 and updated the profit forecast for 25 years: 2023-2025, the company achieved revenue of 999/1306/2,220 million yuan (previous value of 23-24 was 1,027/ 1,589 million yuan), and net profit of 0.83/1.23/228 million yuan (previous value of 23-24 was 0.93/166 million yuan), corresponding to EPS 0.41/ 0.61/1.12 Yuan/share, maintaining a “buy” rating. Risk warning: The recovery in downstream demand fell short of expectations; macro-environmental risks; the progress of fund-raising projects fell short of expectations.