Events:

On October 27, 2023, Huitian Xincai released three quarterly results: in the first three quarters of 2023, the company realized operating income of 3.087 billion yuan, + 7.07% compared with the same period last year; realized return net profit of 296 million yuan, + 13.62% over the same period last year; and realized deduction of non-return net profit of 280 million yuan, + 12.23% over the same period last year. The gross profit margin of sales was 23.89%, an increase of 0.60pct over the same period last year, and the net profit margin of sales was 9.55%, an increase of 0.54pct over the same period last year.

2023Q3, the company realized operating income of 1.006 billion yuan, year-on-year + 2.30%, month-on-month + 0.30%; realized return-to-mother net profit of 72 million yuan,-7.33%, month-on-month-30.10%; realized non-return net profit of 69 million yuan, year-on-year-4.70%, month-on-month-28.87%. The gross sales margin was 20.53%, a decrease of 3.81pct compared with the same period last year, a decrease of 4.41pct; a net sales profit margin of 7.16%, a decrease of 0.75pct and a decrease of 3.12pct compared with the same period last year.

Main points of investment:

The prices of major raw materials have declined a lot, and the performance of 2023Q3 has dropped 2023Q3. The company has achieved operating income of 1.006 billion yuan, + 2.30% year-on-year, + 0.30% month-on-month, and net profit of 72 million yuan,-7.33%, and-30.10%, respectively. The price of upstream raw materials of photovoltaic silica gel has declined a lot, and the competition in the superimposed market is fierce, which is a drag on the company's gross profit margin. According to Baichuan Yingfu, the price of silicone 107 glue has continued to decline since 2023, reaching a six-year low in August. The average price of 2023Q3 and silicone 107glue in East China is 14305 yuan / ton, which is 7.17% lower than that of 2023Q2. Although the company's shipments continued to grow, the gross profit was still dragged down. 2023Q3, the company's gross profit was 206 million yuan, down 34 million yuan from the same period last year and 44 million yuan from the previous month. In terms of expenses, Q3 sales / management / financial expenses year-on-year were-0.08 Universe 0.10 picks 0.13 million yuan, respectively, quarter-on-month were-0.02 Universe Universe 0.04 picks 0.15 million yuan. The increase in financial expenses was mainly due to the decrease in exchange gains.

Looking forward to the fourth quarter, the price of silicone 107glue has stabilized and rebounded. According to Baichuan Yingfu, as of October 28, 2023, the average price of silicone 107glue in eastern China was 15300 yuan / ton, rebounding 13.33% from the August low of 13500 yuan / ton. Considering the inventory cycle of raw materials for about one month, the profitability may have been repaired.

Blossom at more points and actively expand production and growth

As a leading enterprise in the domestic engineering adhesive industry, the company has continuously maintained its resource investment in photovoltaic new energy, new energy vehicles, communications electronics, smart home appliances, high-speed rail, aerospace and other industries in recent years, and has accumulated a large number of high-quality customers in many fields. and the share of key customers continues to increase. At the same time, the company has a rich reserve of new business, including butyl glue, water blocking adhesive, PUR hot melt adhesive, epoxy bottom filling adhesive, UV adhesive, chip binding adhesive, lithium anode adhesive and other products, and is gradually achieving technological breakthroughs or market volume to achieve downstream multi-point flowering.

Under the pull of the rapid development of many downstream, the company actively expands production to ensure the supply capacity. In the first half of the year, the annual output of 30,000 tons of photovoltaic silicone sealant, 10,000 tons of polyurethane adhesive for lithium battery, 15000 tons of lithium battery electrode adhesive and 36 million square meters of solar cell back film have been completed and put into production one after another. The company has a wealth of proposed / under construction projects, including Guangdong 39300 tons of communications and electronics new materials project, annual output of 100000 tons of new energy and new materials project, 75000 tons of lithium power new materials industrial park project and Vietnam annual output of 2600 million square meters of photovoltaic backplane construction project, etc., the gradual release of new production capacity will bring a continuous driving force for the company's performance growth.

Earnings forecast and investment rating are based on the company's performance in the first three quarters, we adjust the company's profit forecast, and expect the company's 2023-2025 return net profit to be 3.64,4.70 and 608 million yuan, respectively, with a corresponding PE of 15,12 and 9 times, maintaining the company's "buy" rating.

The risk indicates the risk of raw material price fluctuation, the risk of a sharp fall in product prices, lower-than-expected downstream demand, intensified competition in the industry, and less-than-expected new production capacity.