3Q23 performance meets market expectations
The company announced results for the first three quarters of 2023: revenue of 2.91 billion yuan, year-on-year + 3.83%; net profit of 278 million yuan, corresponding to earnings per share of 0.34 yuan, year-on-year-24.44%, in line with market expectations. Of this total, 3Q23's income was 969 million yuan, + 13.87% compared with the same period last year, and the net profit was 63 million yuan, + 372.66% compared with the same period last year.
3Q23's performance improved compared with the same period last year. We believe that the main reasons are: 1) the price of PTMEG, the main raw material of spandex business, has declined. According to Baichuan Information, the average price of 3Q23 PTMEG is 12900 yuan / ton, which is-47.3% of the same period last year. 2) the shipment volume of aramid business has maintained steady growth.
Trend of development
Spandex prices may continue to maintain bottom shocks. The average annual price of spandex in 3Q23 is 308000 yuan per ton, which is-9% year on year and-3% month-on-month. The prosperity of the industry is still relatively weak. We believe that the industry boom still maintains the bottom shock, mainly due to the relatively large amount of new production capacity in the industry in 22-23. Looking forward, considering that the production capacity of spandex in China may reach 1.3 million tons / year by the end of 2023, while the apparent consumption of spandex on the demand side may maintain a growth rate of 5-10% in the next 2-3 years, the relationship between supply and demand will remain loose, accordingly, we expect spandex prices to remain volatile at the bottom.
Aramid business to maintain steady growth, pay attention to the progress of aramid coating verification. In 2022, the global nominal production capacity of aramid is about 14-150000 tons, an increase of about 11% over the same period last year; the total global demand is about 11-120000 tons, an increase of about 6% over the same period last year. Looking forward, we believe that the downstream flame retardant protection market demand is still expanding, and the lithium diaphragm aramid coating technology is gradually mature, and the global aramid demand may maintain steady growth in 23-25 years.
In addition, considering that the company's 3000 million square meters / year aramid coating pilot line has achieved stable operation, we suggest that investors continue to pay attention to the downstream customer verification progress of aramid coating and the potential catalysis of subsequent coating capacity expansion on the company's performance.
Profit forecast and valuation
It will take time for spandex to recover, and we will lower the 2024 net profit by 35.4% to 386 million yuan / 654 million yuan. The current share price corresponds to 2023 34.1x/20.1x Pmax E in 2024. Maintain a neutral rating, taking into account the adjustment in earnings forecasts and the potential catalysis that the company's aramid coating business may bring to the company's valuation, lowering the target price by 25.0% to 18.00 yuan, corresponding to 2023 40.3x/23.8x Pmax E in 2024, which has 18.0% upside compared to the current share price.
Risk
Spandex prices continue to decline, aramid coating verification is not as expected.