Incident: On April 24, the company released its 2022 annual report, achieving revenue of 3,517 billion yuan, an increase of 30.01% over the previous year; achieving net profit of 515 million yuan to the mother, an increase of 81.52% over the previous year. The corresponding gross profit margin was 27.67%, an increase of 4.83 pct over the previous year; the net profit margin was 14.65%, an increase of 4.15 pct over the previous year. Mainly due to the increase in the price of anti-scorching agent, the leading product, and the increase in exchange earnings throughout the year. 2022Q4 achieved operating income of 82 billion yuan, an increase of 9.65% over the previous year, a decrease of 6.28% from the previous month; it achieved net profit of 77 million yuan, an increase of 103.01% over the previous year, and a decrease of 48.49% from the previous month. The main reason was that Q4 demand and exchange losses dragged down performance in the short term.
Prices of leading products have increased, and exchange earnings have increased profits. Benefiting from leading product processing additives and price increases for some high-end high-performance varieties, high-performance rubber additives achieved revenue of 2,284 billion yuan in 2022, an increase of 24.34% over the previous year; the corresponding gross profit margin was 31.28%, an increase of 10.01 pct over the previous year. Due to reduced market supply, the anti-coking agent CTP market price has continued to rise since 2021, and the high level stabilized in 2022. The gross profit of anti-coking agent CTP in the first three quarters of 2020/2021/2022 accounted for 23.48%/39.99%/60.57% of the company's overall gross profit, respectively, supporting the company's performance growth. Benefiting from exchange rate fluctuations, financial expenses in 2022 were -258.401 million yuan, achieving exchange earnings of 41.9059 million yuan. Compared with financial expenses of 299.635 million yuan and exchange losses of 108.663 million yuan in the same period of the previous year, the annual performance was significantly enhanced.
New and old products are arranged in multiple points, and capacity expansion drives growth. In October 2022, the “annual output of 40,000 tons of insoluble sulfur” project using a continuous method was successfully completed and put into operation. The scale of the leading product, insoluble sulfur, was doubled, and competitiveness was further enhanced, which helped domestic substitution and overseas exports. The company focuses on expanding its main rubber additives business and is actively expanding in the direction of life and health chemicals and other fine chemicals. By the end of 2022, the company's projects under construction included the Big Health series product project, 10,000 tons/year rubber anti-coking agent CTP production device, 6000 tons/year accelerator DZ production device, electrolyte additive VC project, the 90,000 ton rubber additive project, the Derrick rubber additive construction project, and the bulk rubber additive DBD production system construction and industrialization project. In 2023, Derrick's 10,000 ton rubber anti-coking agent CTP project, 10,000 ton resin project, projects with an annual output of 65,000 tons of silane coupling agent, etc., the special silicon new material produced 40,000 tons of silicon hydrochlorosilicon combined with 6,500 tons of silicon tetrachloride project, and Huatai New Materials's annual production of 15,000 tons of organic peroxides are expected to advance one after another, and the company's future growth momentum is sufficient.
Investment advice: The company's earnings per share for 2022-2024 are estimated to be 1.47, 1.84, and 2.27 yuan respectively, corresponding to the current stock price PE of 6.37, 5.08, and 4.13 times, respectively. Considering that the company is a leading manufacturer of comprehensive rubber additives, it is expected that the rich projects under construction will be concentrated in 2024 to maintain the “buy” rating.
Risk warning: The progress of projects under construction falls short of expectations; the recovery of downstream demand falls short of expectations; risk of product price fluctuations.