Jiahua Energy released its 2022 annual report. In 2022, the company achieved a total revenue of 11.503 billion yuan, an increase of 26.90% over the previous year; the net profit returned to the mother was 1,598 billion yuan, a year-on-year decrease of 11.69%.
The decline in profit in 2022 was mainly due to the increase in the purchase price of raw materials. 1) Looking at revenue by product, fatty alcohol (acid), sulfonated pharmaceutical products, polyvinyl chloride, sulfuric acid (total acid), chlor-alkali, steam, photovoltaic power generation, handling and related revenue in 2022 changed 31.69%, -12.25%, 43.99%, 12.49%, 29.46%, 16.11%, 5.90%, and -14.86% to 38.78, 6.74, 2.44, 14.25, 74, 1.39, 105 million yuan respectively. 2) Looking at gross margin by product, fatty alcohols (acids), sulfonated pharmaceutical series products, polyvinyl chloride, sulfuric acid (total acid), chlor-alkali, steam, photovoltaic power generation, handling and related gross margins in 2022 were -4.39, -12.91, -21.37, -8.37, -8.37, -8.37, -8.37, -8.37, -8.37, -8.92, -0.99, -5.95, 1.20 percentage points to 14.04%, 12.25%, 13.99%, 10.42%, 53.53%, 24.33%, 46.20%, 85.77%, 24.33%, 46.20%, 85.77%, respectively. 3) Looking at the purchase prices of raw materials, the prices of palm kernel oil and isolated palm kernel oil fatty acids, ethylene, industrial salt, toluene, and sulfur increased 15.54%, 0.62%, 31.67%, 31.18%, 17.87% to 10574.30, 7473.20, 483.86, 6556.34, and 1922.15 yuan/ton respectively. 4) The sales, management (including R&D), and financial expenses rates in 2022 were -0.05, -0.70, and 1.26 percentage points, respectively, to 0.10%, 4.79%, and 1.04%, respectively. The total cost rates for the three categories changed 0.51 percentage points to 5.93%.
Relying on existing major products, the company is digging deep to expand the downstream high value-added industrial chain. 1) In March 2022, the company invested a total of 2 billion yuan to build the 300,000 tons/year vinyl chloride (VCM) phase II project and the 300,000 tons/year polyvinyl chloride (PVC) phase II project. 2) In March 2023, the company plans to invest no more than 600 million yuan to build 150,000 tons/year of various fatty alcohol plants and supporting facilities. 3) In August 2022, the main project of the company's cryogenic tank project was basically completed, and the construction of various auxiliary facilities is in progress.
The company continues to develop its hydrogen energy and photovoltaic business and vigorously develops the green energy economy. 1) In 2022, the company built a hydrogen power generation demonstration project and steadily promoted distributed hydrogen power generation projects (hydrogen fuel cell fixed power plant system), which is conducive to promoting the reduction of the company's energy consumption. 2) The company promotes the construction of ground-based power plants and distributed power plants that are easy to consume. In 2022, the company's PV installed capacity was 142.8 MW, and 42.8 MW of distributed photovoltaic power generation units have been completed.
Profit forecasts and reference ratings. We lowered our performance due to falling prices for chlor-alkali products.
We expect the company's EPS to be 1.28 (-15%), 1.35 (-22%), and 1.45 yuan (new) respectively in 2023-2025. Referring to the valuations of comparable companies in the same industry, we gave 11 times PE in 2023. The corresponding target price was 14.08 yuan (previous target price was 13.65 yuan, based on 13 times PE in 2021, +3%), maintaining a superior market rating.
Risk warning. The progress of production capacity under construction fell short of expectations. Prices of products such as fatty alcohols and sulfonated pharmaceuticals fluctuated greatly, prices of raw materials fluctuated, and the macroeconomic economy declined.