Key points of investment:
The company published the first quarter report of 2023. The reporting period achieved operating income of 624 million yuan (YoY +57.46%, QoQ -37.85%), net profit of the mother of the mother of 97 million yuan (YoY +87.93%, QoQ -56.89%), and net profit of 88 million yuan (YoY +291.14%, QoQ -61.23%), which fell short of expectations.
Q1 Downstream inventory continues to be removed, and the company's sales volume is under month-on-month pressure in the short term. Due to the high inventories of downstream enterprises in 22Q4, the first quarter of 2023 continued to be removed from warehouses. Combined with the influence of the Spring Festival and New Year's Day in January, overall downstream demand weakened slightly. However, due to the intensification of the anti-globalization trend, downstream demand for superimposed lubricants is scattered, and the bargaining power of the company's products is high. Product prices are expected to remain basically the same from month to month, maintaining an average sales price of about 20,000 yuan/ton. Corresponding to Q1 sales volume of about 31,000 tons, sales are under pressure month-on-month.
In terms of gross margin, benefiting from the year-on-year decline in raw material prices, the company's 23Q1 gross margin increased 6.9 pct year-on-year, and fell 3.17 pct to 31.14% month-on-month. Net interest rates came under pressure month-on-month due to month-on-month pressure, rising 2.64 pct year on year and falling 6.71 pct to 15.64% month-on-month. In terms of expenses, the company increased employee treatment, and management expenses increased by 14 million yuan over the previous month.
The planned production capacity was released as scheduled, the anti-globalization trend brought opportunities for international supply chain restructuring, and the company's long-term development logic remained unchanged. The company achieved the acceptance of 60,000 tons of technical improvement projects within 2022, and the current production capacity reached 170,000 tons. The plan for the remaining 90,000 tons of the project is expected to release production capacity one after another in mid-2023. At the same time, the 460,000 ton lubricant additive series product project has entered the EIA and safety assessment stage. In the future, the total long-term production capacity will exceed 900,000 tons/year (including compounds and intermediates, etc.), and the overall scale is growing rapidly. The company seized the opportunity of supply chain restructuring for major oil companies in 2022, continued to make breakthroughs in customer access, made rapid breakthroughs in overseas markets, and gradually developed into the fifth comprehensive lubricant additive manufacturer in the world other than the “Big Four” companies. There is remarkable room for future development.
Investment rating and valuation: Due to inventory disturbances in the first quarter, the company's sales scale was under short-term pressure. The company's 2023-2024 profit forecast was lowered, and the company's 2023-2024 profit forecast is expected to be achieved of 950,1.48 billion yuan (1.17 billion yuan and 1.59 billion yuan before the adjustment), maintaining the 2025 profit forecast. The corresponding PE valuations are 14X, 9X, and 7X respectively. The company's current PB valuation is 4.67X. Historically, within three years, the PB center was 5.86X, with a high margin of safety and “maintenance”. Commentary level.
Risk warning: downstream demand fell short of expectations; new projects fell short of expectations; there were new entrants in the industry and the competitive pattern worsened; the company received the “Shenzhen Stock Exchange Concern Letter” on April 10, 2023, and announced the “Response to the Shenzhen Stock Exchange Concern Letter” on April 13, which gave special attention.