The company released its semi-annual report for 2023. In the first half of the year, the company achieved revenue of 8.476 billion yuan, a year-on-year decrease of 36.48%, net profit of 114 million yuan, a year-on-year decrease of 95.13%, after deducting non-return net profit of 46 million yuan, a year-on-year decrease of 98.02%. Among them, Q2 achieved revenue of 4.596 billion yuan, an increase of 18.43%, and net profit of 7.428,000 yuan, a year-on-year decrease of 93.01%. The main reason is that the product boom cycle has declined, and the company's profit is under pressure in the short term.
Glyphosate: Prices continued to decline due to the extended digestion cycle of overbought inventories in the early stages of the market. In the first half of 2023, due to early overbuying in major global pesticide markets, the digestion cycle of domestic companies' pesticide product inventories was extended. Glyphosate stocks reached their highest point in May 2023, and prices continued to decline. According to the company's announced business data, the price of agricultural chemical raw materials in Q2 fell 41.98% month-on-month to 28,800 yuan/ton, but sales of glyphosate in the first half of the year increased further by 41,800 tons. The crop protection sector achieved revenue of 3,714 billion yuan in the first half of the year, a year-on-year decrease of 48.06%. Under pressure. Looking back, we think the most pessimistic point of time has passed. With the removal of inventories and the recovery of overseas terminal demand, glyphosate prices have shown signs of rebound. It is expected that entering Q4, the world will usher in another traditional peak stocking season. The demand side will further improve, which is expected to drive glyphosate prices up.
Silicon-based materials: Domestic and foreign demand is weak, and profits on the basic side are poor. In the first half of the year, domestic and foreign demand was affected by weak global economic growth, inflation, etc., and the domestic silicone market continued to decline after a brief rise. On the one hand, upstream raw materials continued to weaken, and on the other hand, new monomer production capacity was gradually released. However, the market was already oversupplied. Single manufacturers could only choose to reduce their burden or stop operations due to cost pressure. The industry started at a low level, and some enterprises lost production for a long time. According to statistics from Baichuan Yingfu, the average domestic silicone DMC price in the first half of 2023 was 16,000 yuan/ton, a year-on-year decrease of 44.4%. The company is focusing on developing towards terminalization and high-end development. At present, new silicon-based materials have formed a total of more than 3,000 terminal product clusters, with a terminal conversion rate of over 40%, contributing considerable profits.
Adjust profit forecasts and maintain the “increase in holdings” rating. The company is expected to achieve operating income of 176.84, 197.51, and 21.565 billion yuan (previously 158.51, 174.45 billion yuan, 18.888 billion yuan), net profit of 4.16, 7.42, and 1,045 million yuan (previously 947, 13.76, 1,411 billion yuan), and corresponding PE of 28X/16X/11X, maintaining the “increase in holdings” rating.
Risk warning: Product prices fall; construction under construction falls short of expectations; risk of falling demand.