The company released its quarterly report for 2020, and the results were in line with expectations. 1Q2020 achieved an annual operating income of 1.182 billion yuan (YoY-16.83%,QoQ-9.51%) and a net profit of 243 million yuan (YoY-28.37%,QoQ-14.74%), which was in line with expectations near the median of the previous pre-reduction announcement. The year-on-year decline in 1Q2020's annual net profit was mainly due to the limitation of transportation and logistics due to the influence of the external environment, and the sales volume of fatty alcohols (acids), sulfonated pharmaceutical products and chlor-alkali decreased significantly, but the overall gross profit margin remained stable, falling 0.08 percentage points to 33.80% compared with the same period last year.
The high-end of sulfonated pharmaceutical products brought about a rise in prices and gross profit margin, but sales declined year-on-year under the influence of the external environment. Traffic and logistics were limited, and downstream customer work decreased in February. The output of sulfonated pharmaceutical products increased slightly by 3.18% compared with the same period last year, but sales fell sharply by 37.93%, and inventory increased. With the increase in production and sales of high value-added products BA and the commissioning of TA devices, the proportion of high value-added products in sulfonated pharmaceutical products has increased significantly. The average annual sales price of 1Q2020 has increased by 8.13% compared with the same period last year, and the gross profit margin has increased by 2.92% to 64.69%. The expanding 4000 ton BA and 30,000 t / a sulfur trioxide continuous sulfonation production plant is expected to be put into production by the end of 2020, becoming a new profit growth point in the next two years.
The price gross profit margin of fatty alkyd has increased, steam production and sales have declined, and the load of chlor-alkali plant has been reduced. Affected by the poor logistics caused by the external environment, 1Q2020's fatty alkyd production and sales fell 17.7% and 15.07% respectively compared with the same period last year, but the average price still rose 3.58% year-on-year, and the gross profit margin rose 3.59% to 20.22%, the highest in a single quarter since the second half of 2016. Due to the limited start-up of enterprises in the park and reduced steam demand, the annual steam production and sales of 1Q2020 decreased by 7.42% and 9.61% respectively compared with the same period last year, and the gross profit margin continued to rise 2.34 percentage points to 33.15%. The load of chlor-alkali plant was reduced, the price decreased by 9.73% compared with the same period last year, and the gross profit margin decreased by 3.32% to 38.19% compared with the same period last year.
We will gradually improve the layout of the hydrogen energy industry chain. In 2019, the company successively cooperated with American Air products Company to introduce advanced liquid hydrogen production technology by using the company's by-product hydrogen and low-cost industrial liquid nitrogen in the park to realize low-cost large-scale hydrogen preparation and transportation. United Nations Rich hydrogen Energy and Shanghai Remodeling established Jiangsu Jiahua hydrogen Energy Technology Co., Ltd., which is committed to the investment, construction and operation of hydrogen filling stations in the Yangtze River Delta, through the linkage of stations to realize the timely supply of hydrogen energy to logistics vehicles.
Signed the "Strategic Cooperation Framework" and the "hydrogen liquefaction Plant Cooperation Framework Agreement" with Zhejiang Energy Group, the two sides will cooperate to carry out hydrogen liquefaction project and jointly establish the first commercial liquid hydrogen plant in China. Through the technical transformation of the chlor-alkali plant in Jiahua Energy Plant, the hydrogen purification and liquefaction plant will be built. Speed up the improvement of the layout of the hydrogen energy industry chain.
Investment rating and profit forecast: the expansion of the company's sulfonated pharmaceutical products and the gradual production of VCM and PVC projects will bring sustained growth in the company's performance, and the layout of hydrogen energy business will open the growth space. We maintain the company's 2020-2022 homing net profit forecast of 11.66,15.15 and 1.818 billion yuan, and the corresponding stock price PE is 11,8 and 7 times respectively.
Risk tips: 1. The prices of caustic soda and fatty alkyd products have fallen sharply; 2. The prices of raw materials such as palm kernel oil have risen sharply. The slow return to work of enterprises in the park has led to a decline in steam demand.