Considering the impact of falling prices of maleic anhydride derivatives, the company's main product, on profitability, we lowered the company's EPS forecast for 2023-2025 to 1.08/1.54/1.93 yuan (the original forecast was 1.76/2.16/2.63 yuan). Referring to the company's historical valuations, we believe that 22 times PE in 2023 is a reasonable valuation level for the company (corresponding to the 10-digit PE multiple since the company went public), and the corresponding target price was 24 yuan. It is expected that, driven by downstream demand for maleic anhydride derivatives, the continuous optimization of the product structure and the successive implementation of new production capacity will inject momentum into the company's performance growth. Maintain a “buy” rating.
2023H1 revenue fell 15.00% year on year, and net profit on return fell 31.82% year on year. In 2023H1, the company achieved revenue of 697 million yuan, -15.00% of the same period; realized net profit of 142 million yuan, or -31.82% of the same period; achieved net profit of 126 million yuan after deducting non-return net profit of 126 million yuan, or -36.35% of the same period. The company achieved revenue of 347 million yuan in a single quarter in 23Q2, -21.79% year on year, -0.72% month on month; realized net profit of 72 million yuan, -42.31% year on year, +2.36% month on month; achieved net profit of 65 million yuan after deducting non-return net profit of 65 million yuan, -44.73% year on year, +6.90% month on month.
In the first half of 2023, the company's maleic anhydride derivatives achieved revenue of 499 million yuan, down 21.44% year on year, and sales volume of 41,400 tons, up 23.40% year on year. Among them, sales of products used in the wind power sector accounted for more than 10% of the total sales volume of maleic anhydride anhydride derivatives. The gross profit margin was 27.87%, down 10.06 pcts from the same period last year; operating income of functional materials intermediates was 112 million yuan, down 2.32% year on year, and gross profit margin was 44.21%, up 6.97 pcts from the same period last year.
The 2023H1 rate increased by 1.06 percentage points over the same period last year, and net cash flow from operating activities was 138 million yuan. From the cost side, the company's 2023H1 sales/management/R&D/financial expense ratio was 0.46%/2.73%/5.36%/-1.70%, respectively, a change of +0.05/+0.47/+0.37/+0.17pcts over the same period last year.
The total cost rate of the four fees was 6.86%, an increase of 1.06 pcts over 5.79% in the same period last year. Judging from the cash flow situation, the net cash flow generated by the company's 2023H1 operating activities was 138 million yuan, +13.34% year-on-year.
The company continues to maintain a good cash flow from operating activities, and the four-fee rate is well controlled.
Prices of the main raw materials for maleic anhydride derivatives continue to fall. We look forward to the release of demand from the sea wind and the recovery of product prices.
The company is a leading enterprise in the fine chemical industry segment. Its main products are fine chemicals such as maleic anhydride derivatives and functional material intermediates. According to Choice data, the price of maleic anhydride, the main raw material for maleic anhydride derivatives, opened high and low in the first half of 2023. Prices were stable in the first quarter, but continued to fall in the second quarter, falling below 7,000 yuan/ton and 6,000 yuan/ton one after another. Prices of the company's maleic anhydride derivatives fell due to the influence of raw material prices. At present, the price of maleic anhydride stopped falling in July and rose again to over 7,000 yuan/ton in August. Moreover, in recent years, with the rapid development of downstream application fields such as electronic and electrical materials, coatings, and composites, the demand for maleic anhydride derivatives in the global market, especially the domestic market, has been on the rise. On the other hand, in the context of carbon neutrality, China's investment in smart grids and ultra-high voltage transmission lines continues to increase. Benefiting from the promotion of wind power energy, the widespread application of new composites, and the rapid development of the electronic information industry, China's demand for maleic anhydride derivatives continues to grow, and we look forward to subsequent recovery.
Continuously expand production capacity, increase R&D investment, and maintain a leading position in the industry. Since its establishment, the company has positioned itself as “leading technology, cost advantage, continuous optimization and extension of the product line”. It has successively developed and produced high-value-added products to fill the gaps in domestic industrial production. In recent years, it has continuously developed and expanded its customer base and achieved rapid development. At the same time, the company continues to expand production capacity and break growth bottlenecks. In 2022, the company built a “methyltetrahydrophthalic anhydride expansion project with an annual output of 20,000 tons”. The production capacity of maleic anhydride derivatives reached 71,000 tons/year, and progressed in an orderly manner the construction of “maleic anhydride derivatives, functional material intermediates and R&D center projects” and “integrated functional materials R&D and pilot testing projects”. On the basis of consolidating existing products, the company increased investment in scientific research and maintained its leading position in the industry by developing new products with greater profitability.
Risk factors: raw material price fluctuations; product price fluctuations; increased market competition; the company's production capacity construction progress falls short of expectations.
Profit forecast, valuation and rating: Considering the impact of falling prices of maleic anhydride derivatives, the company's main product, on profitability, we lowered the company's EPS forecast for 2023-2025 to 1.08/1.54/1.93 yuan (the original forecast was 1.76/2.16/2.63 yuan). Referring to the company's historical valuation, we believe that 22 times PE in 2023 is a reasonable valuation level for the company (corresponding to the PE multiple in 10 digits since the company was listed), and the corresponding target price is 24 yuan. It is expected that, driven by downstream demand for maleic anhydride derivatives, the continuous optimization of the product structure and the successive implementation of new production capacity will inject momentum into the company's performance growth. Maintain a “buy” rating.