Performance in the first half of the year was under pressure. It is expected that the order bid volume for the second half of the year will reverse, and the company will release its 23-year semi-annual report. 23H1 will achieve revenue of 1,660 million yuan, -5.08% YoY, net profit of 97 million yuan, -43.22% YoY, -43.22%. Looking at the same quarter, 23Q2 achieved revenue of 995 million yuan, -3.70% year on year, achieving net profit of 57 million yuan, or -32.55% year on year. In the first half of 2023, net revenue and profit performance was under pressure due to factors such as insufficient investment in infrastructure and real estate projects and sluggish demand.
Sales of water reducing agents declined year on year, and functional materials grew steadily
23H1's high-performance water reducing agents/high efficiency water reducing agents/functional materials achieved revenue of 971/0.53/222 million yuan, respectively, -10.66%/+1.67%/-4.91%. The decline in revenue was mainly affected by the decline in sales volume. H1 sales volume was 4848/2.47/109,000 tons, respectively, -5.75%/-6.79%/-8.09%, year-on-year, mainly hampered by insufficient investment in infrastructure and real estate. In terms of price, the price of H1 high-performance water reducing agent/high efficiency water reducing agent/functional material was 2003.60/2141.85/2033.51 yuan/ton, -5.21%/+9.07%/+3.46%, respectively. The company's South China production base in Jiangmen, Guangdong was officially put into operation. The synthesis capacity of high-performance water reducing agents was expanded to 649,000 tons, and the national layout was further improved. The company continued to step up its business development efforts in the field of infrastructure engineering and participated in the construction of a number of national and local key projects. The company's overseas business has maintained a rapid development trend. It has achieved significant growth in many “Belt and Road” countries and regions. At the same time, the range of products sold overseas has also continued to be rich. 23H1 Testing achieved revenue of 347 million yuan, +9.12% over the same period, and expanded its business to new fields such as rail transit and environmental ecology.
The decline in prices affected gross profit margins, and the capital structure was further improved
23H1's gross profit margin was 36.13%, +0.05 pct year on year. The company's average purchase price of ethylene oxide decreased by 18.11% compared to the same period last year. The cost rate for the period was 26.21%, +2.81 pct, of which the sales/management/R&D/financial expense ratio was 11.60%/8.36%/4.89%/1.36%, and the year-on-year change was +2.15/+0.90/-0.09/-0.14pct. Under comprehensive influence, the net interest rate was 8.08%, or -3.16% year-on-year. 23H1's revenue ratio was 98.93%, year over year -9.65 pct, cash out ratio 103.87%, year over year - 21.43 pct; net CFO - 163 million yuan, year over year - 07 billion yuan.
Business diversification has continued to advance in 23 years. We are optimistic about medium- to long-term growth. We believe that as the company's production capacity investment+penetration rate increases, the profit elasticity of the main water reducing agent business is expected to be fully reflected, and the functional materials and overseas sectors have more potential for growth. Considering the pressure on the company's performance in the first half of the year, the company lowered its 23-25 net profit forecast to 2.3/37/47 billion yuan (previous value: 4.2/54/650 million yuan) to maintain the “buy” rating.
Risk warning: Production capacity investment has fallen short of expectations, demand has declined, raw material prices have risen sharply, etc.