Event: on August 31, the company released its annual report for 2023. The company realized revenue of 13.61 billion yuan, down 21.33% from the same period last year; realized net profit of 609 million yuan, down 83.32% from the same period last year; and realized net profit of 549 million yuan after deducting non-return, down 85.18% from the same period last year. According to Zhuochuang Information, as of September 22, the average price of glyphosate in the third quarter was 33600 yuan / ton, up 0.53 million yuan / ton or 18.73% from the average price in the second quarter, and down 279,000 yuan / ton or 45.37% from the average price in the third quarter of 2022.
Q2 performance decreased significantly compared with the same period last year, and the profit level was under pressure. In the first half of 2023, due to the weak global economic recovery, intensified competition in the industry and shrinking downstream demand and other factors, the overall prosperity of the chemical industry declined significantly, and the operating pressure of the company increased significantly. In 2023, Q2 Company realized revenue of 7.039 billion yuan, down 17.54% from the same period last year; realized net profit of 159 million yuan, down 91.65% from the same period last year; realized net profit of 137 million yuan, down 93.11% from the same period last year; and realized gross profit of 11.08% and net profit of 2.32%.
The price of glyphosate picked up in the third quarter. In June, due to the rise in raw material yellow phosphorus prices leading to a pick-up in cost, the industry's continued low-load production led to effective inventory digestion, domestic supply and demand tightened, superimposed glyphosate third quarter overseas sales season expectations and other factors, the market price of glyphosate rose to about 26,000 yuan / ton at the end of June. As of late August, the price of glyphosate fluctuated up to 32,000 yuan / ton. The company has a production capacity of 230,000 tons / year for glyphosate and 75,000 tons / year for preparations, ranking first in China. According to Zhuochuang Information, as of September 22, the average price of glyphosate in the third quarter was 33600 yuan / ton, up 0.53 million yuan / ton or 18.73% from the average price in the second quarter, and down 279,000 yuan / ton or 45.37% from the average price in the third quarter of 2022.
The steady progress of the project under construction is expected to give further play to the strategic layout advantages of the industrial chain. In the first half of the year, the company's key projects progressed steadily. Hubei Xingrui 550t / a silicone microcapsule pilot production line was completed in March this year and has now achieved batch sales; Hubei Ruijia 200,000 t / a RTV project (phase I) entered the trial operation stage after it was completed in mid-July; the company has completed the 800T / yr pilot test of the phosphating agent project and is carrying out 5000 t / an industrial plant design. The company's 5000 cubic meters / year aerogel felt project, the holding subsidiary Hubei Xingyou 200,000 tons / year battery-grade iron phosphate project phase I project, and the participating company Hubei Youxing 300,000 tons / year lithium iron phosphate first phase project, phosphate fluorine lithium industry 100000 tons / year battery-grade lithium dihydrogen phosphate project will be completed and put into production this year.
Investment advice: considering the intensification of competition in the silicone industry and the decline in product prices, we have adjusted the overall performance of the company. It is estimated that the company's earnings per share in 2023-2025 will be 1.46,1.60 and 1.87 yuan respectively, corresponding to 14,13 and 11 times PE respectively, maintaining a "buy" rating.
Risk hint: project production is not as expected, downstream demand is not as expected, product price fluctuation risk.