Description of the event
On the evening of August 25, the company released its 2023 semi-annual report. In 2023H1, the company achieved operating income of 492 million yuan, a year-on-year decrease of 6.02%; realized net profit of the return home was 103 million yuan, a year-on-year decrease of 21.51%. Basic earnings per share were 0.25 yuan/share, down 21.52% year on year.
The performance of inorganic chemicals in the first half of the year was under pressure, and carboxyl/hydroxychloride performance increased significantly. Overall, 2023H1 achieved revenue of 492 million yuan, a year-on-year decrease of 6.02%; realized net profit of 103 million yuan, a year-on-year decrease of 21.51%; realized net profit of 101 million yuan, a year-on-year decrease of 19.26%; basic earnings per share of 0.25 yuan/share, a year-on-year decrease of 21.52%. By business, in terms of inorganic chemicals, 2023H1 achieved revenue of 110 million yuan, a year-on-year decrease of 52.85%; gross margin was 36.65%, a year-on-year decrease of 7.88 pcts, mainly affected by falling prices of sulfoxide chloride and sulfuryl chloride. In terms of carboxyl chlorides, 2023H1 achieved revenue of 326 million yuan, an increase of 22.64% over the previous year; gross margin was 40.42%, an increase of 5.06 pcts over the previous year, mainly benefiting from the rapid increase in the company's high-margin aramid monomer production capacity utilization rate. In terms of hydroxychlorides, 2023H1 achieved revenue of 58 million yuan, an increase of 75.22% over the previous year; gross margin was 24.41%, an increase of 5.77 pcts over the previous year, mainly benefiting from the increase in chloroether production capacity utilization.
PEKK's volume is imminent, creating a new performance growth pole
PEKK has excellent material properties, high added value, and is at the top of the material pyramid, which is of great significance to the country's strategic development and industrial upgrading. However, due to the extremely high technical barriers of PEKK, currently only a few foreign companies in the world, such as Solvay and Arkema, have achieved mass production. Considering its strategic significance, PEKK materials urgently need to be localized. The company began independent research on PEKK in 2013, sharpened one sword after ten years, broke foreign technology blockades, successfully achieved continuous and large-scale production of PEKK, and obtained 35 PEKK-related invention patents, formed its own complete production technology system, and filled the gaps in domestic PEKK production technology. The 1,000 tons/year PEKK with the company's independent technical support will be officially put into operation in 2023. At that time, the company will become the first domestic enterprise to achieve mass production of PEKK, opening a new era of domestic replacement for PEKK.
Investment advice
As a leading global sulfoxide chloride company, the company is actively expanding downstream products in the industrial chain. It has gradually formed a three-dimensional industrial structure based on the sulfoxide chloride business, which further extends to polymeric monomer/terephthalyl chloride, p-nitrobenzoyl chloride, etc. of high-performance aramid fibers, to the high-performance polymer material polyether ketone (PEKK) and related functional products. Future growth can be expected. Given that the company's main product, sulfoxide chloride, is at the bottom of the cycle, the production schedule for the new products PEKK and LiFSI has been adjusted. It is estimated that from 2023 to 2025, the company will achieve revenue of 12.93, 23.57, and 3.34 billion yuan respectively (previous values were 1,450, 26.06, and 3.653 billion yuan, respectively), and net profit of 272, 503, and 669 million yuan (previous values were 346, 611, and 845 million yuan, respectively). The corresponding PE is 32, 17, and 13 times, respectively. Maintain the company's “buy” rating.
Risk warning
(1) Increased competition in the industry;
(2) Downstream demand falls short of expectations;
(3) Fluctuations in raw material prices;
(4) The progress of the company's production expansion fell short of expectations.