The company released its three-quarter report in 2022, with operating income of 13.422 billion yuan in the first three quarters, an increase of 6.81% over the same period last year, net profit of 1.725 billion yuan, down 42.61%, and non-return net profit of 1.657 billion yuan, down 14.92% from the same period last year. Among them, the operating income in the third quarter was 4.348 billion yuan, down 4.68% from the same period last year and 4.85% from the same period last year; the net profit returned to the mother was 300 million yuan, down 37.65% from the same period last year and 68.54% from the previous year. In the first three quarters, the company's sales gross profit margin was 30.05%, down 8.06 pcts from the same period last year; the net sales margin was 14.59%, down 11.14pcts from the same period last year. The company's profitability is under pressure due to the increase in operating costs and the profit or loss of fair value changes. The company's dye industry is expected to pick up and maintain its buy rating.
Support the main points of rating
Profitability is under pressure, and the average price of products has improved in the first three quarters. In the first three quarters and one quarter, the company's homing net profit decreased significantly compared with the previous quarter, mainly due to the decrease in gross profit margin of business such as dyes and intermediates as a result of rising raw material costs, as well as a significant decline in the fair value of investment such as stock PE and equity investment income. The output of dyes and auxiliaries of 22Q3 Company was 41500 tons and 11500 tons respectively, down 38.74% and 16.33% from the previous month; sales volume was 52300 tons and 14500 tons, down 15.21% and 10.64% from the previous month. The output of 22Q3 intermediates was 25200 tons, up 5.92% from the previous month; sales volume was 22900 tons, up 6.31% from the previous month. In the first three quarters, the average prices of dyes, auxiliaries and intermediates were 388,000 yuan / ton, 1600,000 yuan / ton and 467000 yuan / ton respectively, up 7.40%, 15.53% and 4.46% over the same period last year. Although the average price of the company's products has rebounded, the increase in operating costs is more obvious, and the company's profitability is under pressure.
The recovery of terminal demand is slow, and the printing and dyeing industry is waiting for it to pick up. According to the data of the National Bureau of Statistics, from January to August 2022, the output of printing and dyeing fabrics produced by enterprises above the scale of the printing and dyeing industry was 36.098 billion meters, down 8.34 percent from the same month last year. In August, the output of printing and dyeing enterprises above scale was 4.622 billion meters, down 1.44 percent from the previous month. From January to August, the retail sales of clothing, shoes, hats, knitted and textile goods above the national quota decreased by 4.4% compared with the same period last year. According to Qicaiyun e-commerce data, the price of disperse black ECT in August is about 20.5 yuan / kg, down 4.65% from the previous month. Under the influence of epidemic situation, inflation, geopolitics and other factors, the consumer demand for textiles and clothing in the terminal market, especially in the domestic market, recovers slowly, and the printing and dyeing industry waits for it to pick up.
The production capacity under construction is gradually released and the real estate business is promoted in an orderly manner. According to the 2021 annual report, the company has an annual output of 9000 tons of anthraquinone dyes (some have been put into production). In terms of intermediates, there are an annual production of 20, 000 tons of H acid (the first phase of trial production), an annual production of 4500 tons of m-aminophenol (trial production) and an annual production of 9000 tons of m-aminophenol (trial production). In terms of real estate business, according to the 2022 mid-term report, the construction of Huaxing New Town project started smoothly; the site project of Longsheng Fuxinli project was completed, some residential and commercial property transfer work was started, and the investment and decoration work of Fuxinhui continued to move forward.
Valuation
Taking into account the sharp rise in raw material prices, dye enterprises start work, transport restrictions, the overall profitability under pressure. The profit forecast is lowered, and the earnings per share from 2022 to 2024 are expected to be 0.71,0.91,1.14 yuan respectively. The current price-to-earnings ratio is 12.9 times, 10.0 times and 8.0 times respectively, maintaining the buy rating.
Main risks faced by rating
The environmental protection policy was relaxed and the epidemic lasted longer than expected.