Main points of investment:
Company announcement: the company achieved operating income of 1.117 billion yuan (YoY-4.24%), net profit of 69 million yuan (YoY-14.17%) and non-return net profit of 66 million yuan (YoY+3.17%) in the first three quarters of 2023. The performance is in line with expectations. Among them, Q3 realized operating income of 398 million yuan (YoY + 6.69% QoQ-0.75%), net profit of 18 million yuan (YoY-28.13% QoQQ-35.71%), and non-home net profit of 17 million yuan (YoY-11.76% QoQ-37.04).
2023Q3 raw material cost pressure, superimposed research and development and financial expenses increase, the company's performance is under pressure. 2023Q3 terminal demand is weak, TPU boom bottom shock, but raw material end pure MDI boom rebounded, product cost transmission hindered, price difference ring-to-ring pressure. According to Baichuan information statistics, the average market price of 23Q3 TPU products is 15571 yuan / ton, down 0.3% from the previous month. In terms of cost, the average prices of major raw materials BDO, adipic acid and pure MDI 23Q3 are 11243, 9409 and 21236 yuan / ton, with Q2 changing by + 0.4%,-0.7% and + 12.4%, respectively. The overall cost pressure increases. Through refined production management, the company's Q3 gross profit margin remains constant, with a slight decline in 0.63pct to 14.24%. At the same time, due to the relatively stable exchange rate of Q3 RMB, the company's financial expenses returned to normal, increasing by 4.5354 million yuan from the previous month, and superimposed R & D expenses by 3.6667 million yuan from the previous month, dragging down the company's quarterly net interest rate by 2.4pct to 4.46% from the previous quarter. Although the company's products are low, but the company continues to expand, according to the company announcement, the current TPU production capacity of about 865 million tons / year, 2023 is expected to add 100,000 tons / year production capacity, the volume will double growth; at the same time, the company's high-end shoes and car and clothing film continue to volume, high-end products account for a rapid increase.
The first phase of Henan project is progressing smoothly, and the second phase of the project is planned to land, opening up the company's long-term growth space. According to the company announcement, in the first half of 2022, the company invested in the first phase of polyurethane new materials industrial park through its subsidiary Meirui Technology (Henan), with a planned investment of 1.5 billion tons / year special isocyanate projects, including 100,000 tons / year of HDI, 15,000 tons / year of CHDI and 0.5000 tons / year of PPDI. At present, part of the project has completed the construction of monomer and roads, and part of the equipment has been completed and put into production in the first half of 2024. Because HDI terminal is used in high-precision and cutting-edge fields such as high-speed rail topcoat, aircraft paint and wind power blade paint, the current market price is 36000 yuan / ton and the profitability is high.
In addition to the capacity expansion of 200,000 tons of special isocyanate per year, the second phase of the project plans for products such as m-phenylenediamine, resorcinol and acyl chloride, with a total investment of 5.2 billion yuan and an operating income of more than 20 billion. In addition, the company's Henan base has 1000 mu of land planning, and there are still 1500 mu of land development space in the future. through the construction of this project, it will extend the company's industrial chain, achieve self-supply of some core raw materials of special TPU, reduce production costs and open up growth space.
Profit forecast and investment rating: due to the influence of terminal demand, the prices of the company's main products are adjusted back, so the company's profit forecast for 2023-2024 is lowered, and the net profit is expected to be 1.14,409 million yuan (1.31 yuan and 443 million yuan before the adjustment). It is estimated that the net profit will be 644 million yuan in 2025, corresponding to 53X, 15X and 9X. As the company's performance is expected to improve rapidly after the completion of the Henan project, the company's profits are expected to grow at a compound rate of 138% in 2023-2025, corresponding to a 23-year PEG valuation of 0.4x, so the valuation premium brought about by the company's future growth has not yet been fully reflected, maintaining the "buy" rating.
Risk hint: new project production is not as expected; downstream demand is lower than expected.