Introduction to this report:
The company's 2023 Q3 performance was in line with expectations, mainly due to the high price of precious metal raw materials stored at the beginning of the year, and the decline in the price of 2023Q3 precious metals, which put pressure on profits. Maintain the “increase in holdings” rating and lower the target price to 50.73 yuan.
Key points of investment:
Maintain the “Overweight” rating. Considering that the market price of precious metal raw materials is in a downward channel, the cost reduction of the company's sales products is lower than the decline in sales prices, and the company's profit is under pressure, we lowered the 2023-2025 EPS to 1.21/1.59/2.08 yuan (originally 2.15/2.95/3.69 yuan), combined with comparable company valuations, the 2024 PE32X, and lowered the target price to 50.73 yuan, maintaining the increase in holdings rating.
Q3 The performance was in line with expectations. In the first three quarters of 2023, the company achieved revenue of 1.34 billion yuan, +3.11% year-on-year, net profit of 98 million yuan, -44.21% year-on-year; 23Q3 achieved revenue of 3.7 billion yuan, -22.11% month-on-month, and net profit of 0.7 billion yuan, -86% month-on-month. 23Q3 gross margin/net profit margin 8.38%/1.77%, -7.41pct/-8.73pct month-on-month. The market prices of the precious metal raw materials palladium and rhodium have always been in a downward channel. However, due to the impact of the company's high raw material balance price and changes in product structure, the reduction in the cost of the company's products sold was lower than the decline in sales prices, which led to a decline in the gross margin of the precious metal catalyst sales business.
I am optimistic that the price of precious metals will pick up in the future. According to Wind, the settlement price of 23Q3 NYMEX palladium futures was 1251.66 US dollars/ounce, -39.8% year over year, -12.98% month over month; NYMEX platinum futures settlement price was 934.94 US dollars/ounce, +6.45% year-on-year, -9.42%; the gradual narrowing of the precious metal price decline is already in the bottom range, and we are optimistic that the price of precious metal catalysts will pick up in the future.
Research and development of hydrogen energy catalysts can be expected in the future. WPIC expects China's lightweight/heavy hydrogen fuel vehicle production to reach 100/400,000 vehicles in 2035, and estimates that the demand for hydrogen fuel cell catalysts will be around 105 tons; the company is actively deploying hydrogen energy catalysts, and expects to add 5/15 tons of hydrogen fuel cell production capacity in 2023/2026 to help replace hydrogen fuel cell catalysts domestically.
Risk warning: New production capacity falls short of expectations; hydrogen catalyst research and development falls short of expectations, etc.