Key points of investment:
The company released its 2023 annual report: During the reporting period, the company achieved revenue of 697 million yuan (YoY -15%), net profit of 142 million yuan (YoY -32%), net profit of 126 million yuan (YoY -36%) after deducting non-attributable net profit of 126 million yuan (YoY -36%). 23H1's comprehensive gross margin was 28.07%, down 7.45 pct from the previous year, and the net interest rate was 20.41%, down 5.04 pct from the previous year. In the 23Q1 quarter, the company achieved revenue of 347 million yuan (YoY -22%, QoQ -1%), net profit of 72 million yuan (YoY -42%, QoQ +2%), net profit of 65 million yuan after deducting non-attributable net profit of 65 million yuan (YoY -445%, QoQ +7%). The performance was basically in line with expectations.
23Q1 The company's comprehensive gross profit margin was 26.88%, the year-on-month change was -8.91 pct and -2.38 pct, the net interest rate was 20.73%, and the same month-on-month change was -7.36 pct and 0.63 pct, respectively. In terms of expenses, 23Q2 benefited from fluctuations in the RMB exchange rate and brought exchange gains, and the company's financial expenses fell to -115 million yuan.
The price of the raw material maleic anhydride fell back to a historically low, the price of the company's maleic anhydride derivatives was under pressure, and the narrowing price difference led to a year-on-year decline in performance. Since 2023, the company has actively responded to changes in the business environment, deepened the supply chain layout, and released production capacity for new devices. Sales of maleic anhydride derivatives continued to grow year on year. During the reporting period, sales volume of 41,400 tons was achieved, an increase of 23.40% over the previous year. Among them, sales of products used in the wind power sector accounted for more than 10% of the total sales volume, achieved revenue of 499 million yuan, a year-on-year decrease of 21.44%, and a gross profit margin of 27.87%, a year-on-year decline of 10.06 pct. The main reason for the increase in sales volume and decline in revenue of maleic anhydride derivatives is that its main raw material, maleic anhydride, is affected by weak demand for its main downstream degradable plastics, and the price of butane, an upstream raw material of superimposed anhydride, which continues to fall. According to Baichuan information data, the price of maleic anhydride derivatives in 2023H1 stabilized at a historical low level of 6,500-7,500 yuan/ton, causing the company's maleic anhydride derivative product prices to drop, and profit space continues to narrow. We believe that the future demand side of maleic anhydride derivatives is highly certain, especially in electrical insulation and composites. The company has a large scale and variety of maleic anhydride derivatives. At the same time, the “maleic anhydride anhydride derivatives project” at the Fujian Gulei base
It is progressing in an orderly manner, laying the production capacity foundation for the company's business growth.
As demand for consumer electronics gradually picks up, the company's functional intermediate materials are expected to be released at an accelerated pace. The main products of the company's functional intermediate materials are OLED materials, mainly fluorene and carbazole. According to the interim report, the 2023H1 business achieved revenue of 112 million dollars, a year-on-year decline of 2.32%, a gross profit margin of 44.21%, a year-on-year increase of 6.97 pct, and a year-on-year increase of 6.97 pct. The business growth rate fell short of expectations. We believe that as demand for terminal consumer electronics gradually picks up, the recovery of the panel industry will drive the company's functional intermediate materials industry to accelerate growth. At the same time, due to factors such as the current market environment, the company plans to suspend the implementation of the “Functional Material Intermediates Project” at the Gu Lei base
After construction, the company will decide whether to continue implementing the project based on market conditions and its own actual situation.
Investment analysis: Profit for maleic anhydride derivatives fell short of expectations, and demand for functional intermediates fell short of expectations. The company's net profit forecast for 2023-2025 was lowered to 308, 3.95, 506 million yuan (original values were 382, 5.05, and 647 million yuan), corresponding to PE 17, 13, and 10X, respectively. Currently, the company's stock price has been fully reflected. I am still optimistic that the company's maleic anhydride anhydride derivatives and functional intermediates will continue to rise. According to Wind's unanimous expectations, the company's PE for 2023 is 18X, maintaining the “increase” rating.
Risk warning: 1) downstream demand falls short of expectations; 2) progress of new projects falls short of expectations; 3) raw material prices fluctuate greatly.