Introduction to this report:
The company grew month-on-month in Q2 in 2023, in line with market expectations. Compound release is accelerating, but the lubricant market is recovering weakly. The profit forecast was adjusted, the target price was lowered to 64.5 yuan, and the “increase in holdings” rating was maintained.
Key points of investment:
Maintain the “increase in holdings” rating. Due to the weak recovery in the lubricant market, the EPS for 23-25 was lowered to 2.58/3.28/3.95 yuan, respectively (the original EPS was 3.58/4.64/5.25). Due to the large market space for lubricant additives and high barriers to compound products, the company's penetration rate increased rapidly, but the recovery rate was relatively slow, and the target price was lowered by 64.5 yuan (corresponding to PE in 2023 by 25 times).
23Q2 increased month-on-month, in line with market expectations. The company achieved revenue of 1,338 billion yuan in the first half of 2023, +31.09% year on year, and net profit of 250 million yuan, or 71.05% year on year; of these, 23Q2 achieved revenue of 714 million yuan, +14.42% month on month, and achieved net profit of 153 million yuan, +57.73% over the previous year. The company's rapid year-on-year growth was mainly due to breakthroughs in core customer access and rapid growth in sales of compound agents.
China's exports of lubricant additives continued to grow, and the decline in crude oil helped improve profits. According to customs data, 23H1 China exported 101,300 tons of lubricant additives, +79.3% year on year, and the average export price was 2,3076 yuan/ton, +13.8% year on year. Of these, 23Q2 China's lubricant additive exports were 491,000 tons, +21.9% year on year, and the average price was 22,681 yuan/ton, +5.7% year on year. 23Q2 gross margine/net margin was 33.94%/21.44%, respectively, +2.8/5.92 pcts. The main reason is that the average price of 23Q2Brent crude oil was 78.32 yuan/ton, and -4.51% month-on-month.
The company's production capacity is steadily expanding, and API certification has been obtained one after another. The company currently has a single-agent production capacity of more than 200,000 tons, and is currently in the first group in China. Currently, it has a production capacity of 350,000 tons under construction. Additionally, the company has passed APISP grade compound certification, and the diesel API CK has been partially tested. The new production capacity supporting certification will help the company gain more share in the additive market and accelerate global expansion.
Risk warning: Market development falls short of expectations, raw material prices are rising