Event: the company released the third quarter report of 2023, the company achieved operating income of 9.4 billion yuan in the first three quarters of 23,-18% year-on-year, and return to the mother net profit of 70 million yuan,-86% compared with the same period last year; of which Q3 achieved operating income of 3.8 billion yuan in a single quarter, + 1% year-on-year and + 30% compared with the same period last year. The net profit returned to the mother was 100 million yuan,-34% year-on-year and + 120 million yuan.
Comments:
PC volume and price increased, Q3 performance improved significantly: in 23 years, Q3 company sold 13000 tons of nylon 66 industrial filament, nylon 66 cord fabric, nylon 66 chips, adipic acid, civil silk, bisphenol An and PC, respectively, 19000 tons, 44000 tons, 54000 tons, 4000 tons, 13000 tons, 20000 tons. Compared with-5.9%, + 10.9%, + 1.1%,-2.4%, + 12.4%,-26.4%, + 201%, respectively. The average selling price is 26,000 yuan / ton, 32,000 yuan / ton, 16,000 yuan / ton, 08,000 yuan / ton, 18,000 yuan / ton, 0.9,000 yuan / ton and 11000 yuan / ton, respectively, compared with-5.4%,-9.0%,-5.9%,-3.0%,-0.2%, + 13.5%, + 1.8% respectively. The purchase prices of raw materials adiponitrile and refined benzene are 17,000 yuan / ton and 70,000 yuan / ton respectively, compared with-9.5% and + 14.3% respectively. The average selling price and sales volume of the company's PC products rebounded from the previous month, driving the company's Q3 performance to pick up from the previous month.
Set up Longan Chemical subsidiary to build coke oven gas project to ensure the raw material supply of the company's nylon industrial chain: on August 21, 2023, the company announced that a wholly-owned subsidiary Henan Shenma Longan Chemical Co., Ltd. would be established to prepare for the establishment of 40000Nm3/h coke oven gas comprehensive utilization project, the main products are liquid nitrogen, liquefied natural gas (LNG), liquid carbon dioxide and so on. The construction period of the project is 18 months, and the average annual sales revenue is expected to be 540 million yuan. The company's nylon industry has initially formed a large nylon pattern with the coordinated development of nylon 66 and nylon 6. the industrial development has a great demand for liquid ammonia, LNG and other raw materials, and the main basic raw materials such as liquid ammonia and LNG all rely on outsourcing. After the completion of the project, it will reduce the company's coal consumption, supplement natural gas supply, improve the raw material guarantee capacity of the nylon industry chain, reduce production costs, increase the company's product range, and expand development space.
The adipic nitrile project has passed the comprehensive performance acceptance, and it is expected to enhance the company's cost control ability after it is put into production: on March 16, 2023, the high efficiency supported catalyst and green catalytic new technology project, including the company's adiponitrile project, passed the comprehensive performance acceptance. The company deeply participates in and increases its R & D investment in adiponitrile production. In November 2020, the company announced that it intends to set up a wholly-owned subsidiary, Shenma Aidean Chemical Co., Ltd., to invest in a project with an annual production capacity of 50,000 tons of adiponitrile; in December 2022, the company has increased 210 million yuan to guarantee the construction of the project, which is expected to be put into commissioning by the end of 2023. After the adiponitrile project is put into production, it is expected to enhance the company's raw material cost control ability, stabilize the volatility of the upstream raw material end, and open up the future performance increment space.
Earnings forecasts, valuations and ratings: the nylon industry is declining and the company's profitability is declining. Therefore, we downgrade the company's profit forecast for 2023-24 and add the profit forecast for 2025. It is estimated that the net profit for 2023-2025 will be 1.62yuan (down 64 per cent) / 4.57yuan (down 15 per cent) / 758 million yuan respectively, equivalent to 0.15and0.44x0.73 yuan (EPS). The company has steadily advanced the projects under construction and has broad room for development, so it maintains the "overweight" rating.
Risk tips: new capacity is less than expected; raw material prices fluctuate; downstream demand recovery is not as expected.