Incidents:
On August 25, the company released its semi-annual performance report. In the first half of 2023, the company achieved operating income of 4.304 billion yuan, an increase of 6.5%; achieved net profit of 503 million yuan, an increase of 1.9% over the previous year, net profit of 499 million yuan after deducting non-return net profit of 499 million yuan, an increase of 2.5% over the previous year; and basic earnings per share of 0.55 yuan/share.
Performance improved month-on-month in the second quarter, and the electronic chemicals and carbon emission reduction business continued to grow. Looking at a single quarter, Q2 achieved revenue of 2,246 million yuan, an increase of 3%/9% over the same period; net profit of 275 million yuan, an increase of 2%/21% over the same period. In the first half of the year, the company's carbon emission reduction business and electronic chemicals business continued to grow, and the high-end manufacturing chemical materials business remained stable. The gross profit of the high-end manufacturing chemical materials sector and the carbon emission reduction business sector increased by 8.7% and 32.2% year-on-year. Sales of various products such as polyurethane products, special coatings, nitrogen trifluoride, rubber sealing profiles, and organic transparent materials increased by more than 10% year-on-year. In addition, the company actively carried out quality and efficiency improvement work in the first half of the year, achieving a profit increase of 54.73 million yuan.
The proposed acquisition of Sinochem Blue Sky is expected to benefit from the third-generation refrigerant company, which plans to issue shares to buy 52.81% and 47.19% of Sinochem Blue Sky's shares from Sinochem Group and Sinochem Assets respectively and raise supporting capital. In the end, the total shareholding will reach 100%. Sinochem Blue Sky is a giant in fluorine chemicals. Its business covers the entire fluorine chemical industry chain, and has a leading global market share of multiple products. With the implementation of the third-generation refrigerant quota policy, third-generation refrigerants are expected to start a boom, the industry pattern is expected to be reshaped, and the company's performance is expected to benefit.
Fluorine chemical reserve projects are plentiful. Raising projects to open space for growth The company plans to raise no more than 7.24 billion yuan in shares to no more than 35 specific investors, including foreign trade trusts and Sinochem Ventures, for projects such as the “New 20,000 tons/year PVDF Project”, “200,000 tons/year lithium-ion battery electrolyte project (phase I)”, “19,000 tons of VDF, 15,000 tons of PVDF and supporting 36,000 tons of HCFC-142b raw material project (Phase II)”. The company's fluorine chemical reserve projects are rich, which helps enhance the company's market competitiveness.
Profit Forecasts, Valuations, and Ratings
We expect the company's revenue for 2023-2025 to be 92.9/110.4/13.47 billion yuan, net profit to parent to be 11.6/13.9/17.01 billion yuan respectively, EPS to 1.28/1.53/1.88 yuan/share, respectively, and a three-year CAGR of 14%. Considering the company's deep accumulation of original technology and rich reserve projects, future performance is expected to continue to grow steadily, and with reference to comparable company valuations, we gave the company 23 years 30 times PE, a target price of 38.3 yuan/share, and maintain a “buy” rating.
Risk warning: The investment and construction progress of projects under construction fell short of expectations, the restructuring process fell short of expectations, and product prices fell sharply