Event: The company released its 2023 three-quarter report. In the first three quarters of 2023, the company achieved revenue of 1,725 million yuan, a year-on-year decrease of 10.6%, and net profit of 81 million yuan, a year-on-year decrease of 56.8%. In 2023, Q3 achieved revenue of 590 million yuan, an increase of 9.7% over the previous year, an increase of 2.6% over the previous year; realized net profit of 26 million yuan, a decrease of 32.6% over the previous year, a decrease of 32.8% over the previous year; and realized net profit after deduction of 24 million yuan, a decrease of 27.5% over the previous year and 27.4% over the previous year.
The volume and price of organic pigments increased and the 23Q3 company's performance declined month-on-month. The company's performance declined year-on-year in the first three quarters of 23 years, while Q3 performance declined month-on-month, mainly due to overall weakness in domestic and foreign market demand, oversupply, and falling product sales prices. In 23Q3, the sales volume of the company's organic pigments risol red, permanent yellow, chromatography red, and permanent red products was 2460.0/2820.0/1616.3/1394.3 tons, respectively, up 33.1%/54.8%/35.0%/31.0%, 19.0%/35.3%/17.7%/9.4%, respectively. The average sales price of the four was 2.61/5.04/2.52/645 million yuan/ton, down 16.0%/21.2%/17.7%/25.9%, 5.0% from the same month on month /15.8%/6.1%/11.5% In terms of gross margin, gross margin declined because the decrease in unit sales price was greater than the reduction in costs. In 23Q3, the company's gross sales margin was 16.9%, down 2.1 and 1.2 pct, respectively, from the same period last month. In terms of cost rates, in 23Q3, the company's sales, management, and financial expense rates were 1.3%, 5.2%, and 0.3%, respectively, up 0.3, 0.2, and 1.1 pct from the previous year.
The company is a leading enterprise in the organic pigment industry in China, gradually moving towards high-performance organic pigments. The company is a leading enterprise in the organic pigment industry with scale, industrial chain integration and category advantages. Currently, it has an annual production capacity of 40,000 tons of organic pigments and 10,000 tons of supporting intermediates. The products cover more than 200 specifications and have full chromatographic production capacity, which can meet the differentiated needs of downstream. In order to increase the proportion of high-performance, high-value-added, and more environmentally friendly products, the company plans to raise no more than 604 million yuan (including capital) by issuing shares to specific targets in 2022, and plans to use 267 million yuan to raise capital to invest in the construction of a “project with an annual output of 5,000 tons of high-performance organic pigments and 4,500 tons of supporting intermediates”.
The company lays out sodium-electric cathode materials and uses sodium-electric power to the east wind. In January 19, the company and Ningxia Yinchuan Sodium Factory jointly established Inner Mongolia Yuansheng Sodium Technology Co., Ltd. The company holds 60% of Yuansheng Sodium's shares and plans to build a 20,000 tons/year metallic sodium project. It has now been put into operation. While guaranteeing the supply of raw materials for high-performance organic pigments, it is expected to take advantage of the sodium electricity industry. In terms of sodium-electric positive and negative electrode materials, the company has mature production technology for the inorganic pigment Prussia Blue. In October '22, the company reviewed and passed a resolution to implement a project for cathode materials for sodium-ion batteries with an annual output of 15,000 tons of sodium-ion batteries. The construction period is 2 years.
Profit Forecast, Valuation and Rating: Organic pigments increased in volume and price, and 23Q3's performance declined month-on-month. Due to weak domestic and foreign market demand for organic pigments, we lowered the company's profit forecast for 23-24 and added the profit forecast for 25 years. We expect the company's net profit for 23-25 to be 1.19 (down 62.5%) /1.51 (down 57.2%) /194 million yuan, respectively. The company is a leading enterprise in the organic pigment industry in China. The industrialization of superimposed sodium cathode materials is expected to be realized. We are optimistic about the company's future development and maintain the “increase in holdings” rating.
Risk warning: Downstream demand falls short of expectations, raw material prices fluctuate, and capacity building risks.