In 2012, the company achieved operating income of 580 million yuan, up 7.1% from the same period last year; operating profit of 58.65 million yuan, down 25.9% from the same period last year; net profit belonging to the owner of the parent company was 51.25 million yuan, down 24.4% from the same period last year; and basic earnings per share was 0.1424 yuan. Of this total, the company's operating income in the fourth quarter was 120 million yuan, down 3% from the same period last year; the net profit belonging to the parent company was 8.66 million yuan, down 25% from the same period last year. The performance is in line with expectations.
The company is mainly engaged in the development and production of acrylamide, polyacrylamide and their derivatives. It is one of the large domestic suppliers of polyacrylamide and the second largest manufacturer of polyacrylamide for oil production in China.
The settlement price of PAM for oil production fell, the load rate of new production capacity was on the low side, and the profit decline expanded in the fourth quarter. The company's revenue declined in the fourth quarter, and the gross profit margin fell 1.4 percentage points from the previous quarter. Since the third quarter, the gross profit margin has declined quarter by quarter, and the year-on-year decline has continued to expand. Net profit continued to decline compared with the same period last year, an increase of 1 percentage point over the third quarter. The decline in performance in 2012 was mainly due to two reasons: 1) the settlement price of PAM for oil production fell, sales of PAM for oil production increased by 15%, revenue increased by only 3%, and gross profit margin decreased by 5.5%.
The product structure of anionic flocculant products has been adjusted due to market changes, resulting in a continued decline in production and sales, a 46% reduction in revenue, and a 1% drop in gross profit margin. 2) in April 2012, the company's 10,000-ton cationic flocculant project was put into production. The annual production of 10,000 tons of oil displacement surfactant project was completed and put into production in the third quarter, and the newly formed capacity load rate was low and the gross profit margin decreased due to weak market development. At the same time, market development has led to a surge in the cost rate, which is a further drag on the company's performance: in 2012, sales expenses increased by 30% compared with the same period last year, mainly due to the expansion of sales scale and the increase in transportation and rental fees as well as the salary of employees; management expenses increased by 25% compared with the same period last year, mainly due to the increase in R & D expenses. The annual expense rate increased by 1 percentage point, and the expense rate increased by 3.5 percentage points in the fourth quarter compared with the previous quarter.
The demand for tertiary oil recovery will maintain a rapid growth. The company's main customer Shengli Oilfield "12th five-year Plan" proposed that it will further increase the tertiary oil recovery investment, increase the amount of polyacrylamide and surfactant, and ensure an annual oil increase of more than 1.5 million tons. In addition, in recent years, due to the continuous rise of oil prices, the discovery of traditional oil and gas resources is becoming more and more difficult. Foreign oil companies also pay more and more attention to the investment of improving oil recovery in old oilfields, and the application of polymer flooding is increasing. The good demand of the downstream market will bring better development space for the company.
The focus in the future is the amount of polyacrylamide in the field of water treatment. Foreign water treatment is the first major application field of polyacrylamide products, accounting for more than 50% of the total consumption. With the Chinese government paying more and more attention to environmental protection and the improvement of investment and discharge standards of water treatment facilities, it is expected that the demand for water treatment polyacrylamide will increase by more than 30% in the next three years, and the market size will reach more than 11.5 billion yuan.
Maintain a "neutral" rating: the company's earnings per share from 2013 to 2014 are expected to be 0.19 yuan and 0.24 yuan respectively, with a dynamic price-to-earnings ratio of 59 times and 46 times respectively. The valuation is high, maintaining the "neutral" investment rating.
Risk hint: the risk of leakage of core technology; poor market development makes it difficult to realize growth expectations.