Incident: On March 31, the company released its 2022 annual report. In 2022, the company achieved revenue of 1,597 million yuan, an increase of 14.62% over the previous year; achieved net profit of 422 million yuan, an increase of 67.14% over the previous year; and achieved net profit of 406 million yuan after deduction, an increase of 72.64% over the previous year. 2022Q4, the company achieved revenue of 397 million yuan in a single quarter, a year-on-year decrease of 6.33% and an increase of 4.27% over the previous quarter; it achieved net profit of 101 million yuan, an increase of 32.94% over the previous year, and a decrease of 9.90% from the previous quarter.
The volume and price of maleic anhydride derivatives rose sharply, and the company's profit increased significantly in 2022. In 2022, the company's maleic anhydride derivatives business and functional materials intermediates business achieved revenue of 1,224 million yuan and 212 million yuan respectively, up 20.89% and 5.90% respectively over the previous year. Among them, the revenue growth in the maleic anhydride derivatives business mainly benefited from the sharp rise in volume and price of related products. In 2022, the company's “expansion project with an annual output of 20,000 tons of methyltetrahydrophthalic anhydride” was completed and successfully released. The company achieved production and sales of maleic anhydride derivatives of 70,900 tons and 681,000 tons respectively, up 10.83% and 6.40% respectively over the previous year. Among them, the number of maleic anhydride derivative products used in the wind power sector has exceeded 6,500 tons, accounting for about 10% of the total sales volume of maleic anhydride derivatives. In terms of price, the average price of the company's maleic anhydride derivatives increased 13.6% year-on-year to 181,000 yuan/ton in 2022. Benefiting from the increase in the price of maleic anhydride derivatives and the company's good control of production costs, the company's overall gross margin increased 6.61 pct year on year in 2022, and the gross margin of the maleic anhydride derivatives business increased 12.69 pct year on year. In terms of expenses, due to the increase in exchange gains and losses, the company's financial expenses decreased by about 29.69 million yuan year-on-year in 2022.
Production capacity for maleic anhydride derivatives continues to expand, and demand for OLED organic material intermediates will rise. The company currently has 50,000 tons/year maleic anhydride derivative production capacity. It will add 10,000 tons/year of tetrahydrophthalic anhydride, 10,000 tons/year of hexahydrophthalic anhydride, 21,000 tons/year of methyltetrahydrophthalic anhydride, 5,000 tons/year of methylhexahydrophthalic anhydride, 2,000 tons/year of nadic anhydride, and 2000 tons/year of methylnadic anhydride. In addition, Huicheng Research Institute, a subsidiary of the company, is also planning a “functional materials research and development and pilot integration project”. The project was approved by the EIA in August 2022. In terms of OLED organic material intermediates, along with the increase in yield and operating rate of domestic OLED panel manufacturers, domestic OLED panel shipments will grow, which will drive demand for upstream materials.
As one of the main suppliers of OLED organic material intermediates in China, the company will benefit from this.
Profit forecasts, valuations and ratings: Benefiting from increased volume and prices in the maleic anhydride derivatives business, the company's performance increased significantly in 2022. Considering the gradual implementation and release of the company's new production capacity, as well as the increase in demand in the downstream wind power, paint, and OLED panel fields, which is further driving the company's product sales, we raised the company's 2023-2024 profit forecast and added the 2025 profit forecast. In 2023-2025, the company's net profit is expected to be 5.05 (up 5.6%) /6.50 (up 2.4%) /775 million yuan respectively, maintaining the “buy” rating.
Risk warning: product and raw material prices fluctuate, downstream demand falls short of expectations, capacity building style