The annual report and quarterly report showed impressive results: during the 2017 reporting period, the announcement achieved revenue of 1,284 million yuan, an increase of 56.31% over the previous year, and achieved net profit of 135 million yuan, an increase of 31.30% over the previous year; among them, Q4 achieved operating income of 393 million yuan, an increase of 67.21% over the previous year, and Guimo's net profit of 43 million yuan, an increase of 126.70% over the previous year. This year's Q1 revenue was 374 million yuan, a decrease of 4.83% over the same period last year, an increase of 64.76% over the same period last year, and Guimu's net profit was 35 million yuan, an increase of 86.9% over the previous year.
Leading the industry segment, the volume and price of its main products have risen sharply, boosting performance dramatically. The company is the only listed company in the foundry molding materials segment. Self-hardening furan resin and cold core box resin ranked second and first respectively. The sales revenue of self-hardening furan resin and cold core box resin in 2017 accounted for about 75% of the main business revenue, at 953 million yuan, an increase of 76.48% over the previous year. In 2017, the company's total production of self-hardening furan resin and cold core box resin was 66,000 tons, up 16.32% year on year, sales volume was 65,600 tons, up 13.62% year on year, and corresponding sales revenue increased 76.48% year on year.
The rise in raw material prices is slowing down, downstream demand is strong. The sharp increase in H2 net profit in 2017 was affected by environmental protection. The price of furfural, an upstream product of furyl alcohol, the raw material for self-hardening furan resin, rose sharply, causing furfuryl alcohol to skyrocket from around 8000 yuan/ton in 2016. The highest price in 2017 was 24,900 yuan/ton. Currently, it has fallen back to 13,000-14,000 yuan/ton, and the company's procurement costs have increased.
Downstream demand has just been strong, and there is room for product prices to rise. After price adjustments in the second half of 2017, the net profits of H1 and H2 were 5748 and 9546 million yuan respectively, and their performance was superior to that of the first half of the year.
New production capacity is deployed in an orderly manner to ensure a steady increase in performance over the next 3 years, double the production capacity of the main business, seize the middle and high-end markets, and improve industrial chain support: 75,000 tons of new construction projects were put into operation in 2018 (original capacity 76,000 tons), doubling production capacity, which will help eliminate backward production capacity and develop new markets. Potential demand for products is gradually released, and sales volume will grow steadily by about 15% over the next 2-3 years. At the same time, the company built an expansion project for foundry auxiliary materials. The conditions for formal production are already in place, which is conducive to the epitaxial expansion of the company's main business; adding 40,000 tons of phenolic resin to open up new growth space: the company actively explores other fine chemical fields, with an annual output of 20,000 tons of special solid phenolic resin and 20,000 tons of special liquid phenolic resin projects started in March 2018, gradually contributing to performance in 19, opening up new capacity space.
Profit forecast and rating: The company currently ranks second and first in the domestic market share of self-hardened furan resin and cold box resin respectively, leading the industry segment. Through this IPO fund-raising project, the production capacity of the main business has doubled, boosting the company's 18-year performance. Adding 40,000 tons of phenolic resin will become the company's main performance growth point in the future. We expect the company's net profit for 18-20 to be 168, 2.20, 291 million yuan, EPS of 0.83, 1.09, and 1.44 yuan, and the corresponding PE is 26 times, 19 times, and 15 times. Give it an “increase in holdings” rating.
Risk warning: Production capacity investment fell short of expectations, and environmental policy changes fell short of expectations.