Description of the event
The company released its 2022 annual report. It achieved operating income of 605 million yuan in 2022, an increase of 3.49% over the previous year; achieved net profit of 47.03 million yuan, an increase of 33.33% over the previous year; and achieved net profit of 33 million yuan after deducting non-return mother's net profit, a decrease of 1.87% over the previous year. Looking at the fourth quarter of 2022 alone, 2022Q4 achieved operating income of 127 million yuan, a year-on-year decrease of 19.06%; achieved net profit of 4.99 million yuan, a decrease of 24.48% over the previous year; and achieved net profit of 5 million yuan after deducting non-return mothers, a year-on-year decrease of 24.38%.
Incident reviews
Revenue continued to grow positively under the influence of the pandemic, and polylactic acid sales increased year over year. Affected by the 2022 epidemic, downstream consumer demand declined. The company's revenue in 2022 increased 3.49% year-on-year, and revenue growth was not significant.
In 2022, pure polylactic acid was produced 25,900 tons, an increase of 6.26% over the previous year. Among them, pure polylactic acid sold 16,900 tons, an increase of 21% over the previous year; composite modified polylactic acid sold 12,500 tons, an increase of 8% over the previous year. In 2022, the company's market share of polylactic acid increased in straws, film bags, etc., which led to an increase in sales of pure resins.
In 2022, the company achieved domestic revenue of 497 million yuan, an increase of 7.36% over the previous year; overseas revenue was 101 million yuan, a year-on-year decrease of 13.68%, mainly because application fields such as disposable tableware and daily necessities were affected by factors such as a decline in foreign sales markets and uncertain European policies on degradable materials, which led to a decline in export demand.
Prices of polylactic acid products declined, and net profit after deducting non-net profit declined slightly. In 2022, the price of the company's pure polylactic acid was 21,000 yuan/ton, down 10% from the previous year; the price of composite modified polylactic acid was 19,000 yuan/ton, down 12% from the previous year. In 2022, the company achieved deduction of 33 million yuan in non-net profit, a year-on-year decrease of 1.87%. Under the influence of the epidemic and the external environment, the downstream penetration of polylactic acid fell short of expectations, and product prices declined. Coupled with the rise in the price of corn, the raw material of corn, the company's profit side was suppressed, and net profit after deducting non-net profit declined slightly.
The first-mover advantage is deep, and the 150,000-ton project raised a growth point for performance. At present, only NatureWorks, TCP, Fengyuan Biotech, and Haizheng Biotech are the only companies in the world that have fully mastered “lactic acid-propylacid-polylactic acid” and have achieved stable mass production. The company is the first domestic company to break through prolactide and achieve mass production of PLA, and has a significant first-mover advantage. The company currently has a design capacity of 45,000 tons, and another 20,000 tons of production capacity is in test run. The IPO fundraising project with an annual output of 150,000 tons of polylactic acid is expected to be completed and put into operation in the second half of 2024. In the context of dual carbon and the “plastic restriction order”, the recovery in downstream consumption is expected to drive PLA demand upward. According to the company's prospectus, in 2022-2026, the intended purchase volume of customers reached 3.96, 6.29, 9.09, 12.04 and 136,800 tons, which can basically cover the company's new production capacity.
Investment advice
The company is expected to achieve revenue of 785, 12.17, and 1,814 billion yuan respectively in 2023-2025, up 29.7%, 55.0% and 49.1%; to achieve net profit of 0.64, 0.90, and 139 million yuan, up 35.1%, 41.6%, and 54.5% over the previous year. The corresponding EPS was 0.31, 0.44, and 0.69 yuan respectively. The corresponding company's closing price on March 14, 2023 was 16.24 yuan, and PE 2023-2025 was 53.0, 37.4, respectively 24.2 times, maintaining the “Increase in holdings - B” rating.
Risk warning
The risk of rising raw materials, the risk of capacity expansion falling short of expectations, the risk of increased market competition, the risk that the company's business expansion will be greatly affected by downstream demand, and the risk that policy implementation falls short of expectations.