Event description
The company released its mid-2023 report: revenue in the first half of the year was 820 million yuan, up 4% from the same period last year, while net profit attributable to it was 81 million yuan, down 26% from the same period last year, and non-net profit was down 26% from the same period last year. The revenue of Q2 was 440 million yuan, up 5% from the same period last year, the net profit from attribution was 48 million yuan, down 5% from the same period last year, and the non-net profit was down 5% from the same period last year.
Event comment
Steady growth in revenue and better filtering equipment. The company's revenue in the first half of the year increased by 4% over the same period last year. In terms of sectors, clean air revenue was about 540 million yuan, an increase of 11% over the same period last year, of which the revenue from filter materials was about 240 million yuan, down 8% from the same period last year. The income from purification equipment (remote environment) was about 300 million yuan, up 32% from the same period last year. The equipment performance was better and accelerated in the second quarter, with a month-on-month growth of 37%, or mainly benefited from construction such as semiconductor clean rooms. The other sector's energy-efficient income is about 270 million yuan, down 5% from the same period last year.
Profitability is under pressure periodically, but it is on an upward trend. The company's net profit rate for the first half of the year was about 9.9%, down 4.0 percentage points from the same period last year. The decline in gross profit margin is the core reason for the decline in net profit margin. The company's gross profit margin in the first half of the year was about 24.1%, down 4.9 percentage points from the same period last year. Although the cost of bulk raw materials and energy fell slightly, the increase in the proportion of income from purification equipment lowered the gross profit margin to a certain extent, and the new capacity has not yet been fully released. Depreciation is also affected. In addition, the company's fees during the first half of the year were about 13.4%, down 3.1% from the same period last year, and sales, management, R & D and financial expenses changed by-0.4%,-0.5%,-2.5% and + 0.4% respectively compared with the same period last year. With the help of a rebound in market demand in the second quarter alone, the company's revenue grew by 18% from the previous quarter, and its profitability was also on a rebound trend. The gross profit margin in the second quarter was 25.2%, an increase of 2.4% from the previous quarter. The year-on-year decline narrowed to 1.1 percentage points, the net profit rate in the second quarter was about 10.8%, and the year-on-year decline narrowed to 1.2 percentage points.
To create a distant environment and focus on material production is the future strategy of re-upgrading technology. The company plans to transfer 70 per cent of Yuanyuan's stake to Manhumer Singapore Holdings, with an estimated price of 317 million yuan, while Manhumer Singapore Holdings has been granted a purchase option. the right to purchase the remaining 30 per cent stake in Yuanyuan held by the company for 166 million yuan by itself or by a designated entity. Yuanyuan is priced at 504 million yuan (based on the assumption of no cash and no liabilities), its net profit in 2022 is 28.76 million yuan, corresponding to PE is 18 times, and the net assets at the end of 2022 is 199 million yuan, corresponding to PB is 2.53 times. 1) the sale consideration exceeds the previous acquisition consideration. When the company bought Yuyuan Environment in 2017, the price was 440 million. At that time, the bet performance of Yuyuan Environment was 0.33,0.35 and 37 million yuan respectively from 2017 to 2019, corresponding to 13 times the PE in 2017. 2) the performance of the company's material business is obviously better than that of equipment. The income of purification equipment from 2018 to 2022 is about 4.0,4.9,4.4,4.0and 430 million yuan respectively, and the income of purification equipment fluctuates with the demand for new construction of panels, piggery, semiconductors and so on. However, excluding purification equipment, the company's income grew at a compound rate of about 15% from 2018 to 2022, and the materials business showed stronger growth and competitiveness.
What is the impact of this sale on the company? 1) the profitability and operation quality may be improved, the competition in the filtration equipment business is fierce, the profit margin is low, and the cash flow is weak; 2) the material end sales can be oriented to more purification equipment enterprises and promote their material advantages to more global users. 3) working with filter leader Manhumer Group to jointly expand the application field of distant environment, especially Manhumer's deep ploughing of automobile filtration business, can help the company to expand its layout in the field of new energy vehicles.
The company's performance is expected to be 190 million yuan in 2023 (still considering the distant environment and expected to contribute 30 million yuan in 2023) and 250 million yuan in 2024, with a corresponding valuation of 25 times and 19 times, respectively.
Risk hint
1. The recovery pace of downstream demand is lower than expected
2. The cost of raw materials or energy has risen sharply.