Description of the event
The company released its three-quarter report for 2023, achieving revenue of 1.90 billion yuan (-5.7% year-on-year), attributable net profit of 200 million yuan (-17.7% year-on-year), and attributable non-net profit of 190 million yuan (-15.3% year-on-year). Among them, Q3 achieved revenue of 650 million yuan in a single quarter (+3.6% yoy, +8.5% yoy), imputed net profit of 66 million yuan (+18.7% yoy, +11.4% yoy), and realized imputable non-net profit of 62 million yuan (+12.2% yoy, +9.2% yoy).
Incident comments
Prices of fatty amines and organic solvents have risen, and sales of aliphatic amines have declined in the short term. According to Baichuan Yingfu, the average market prices for 2023Q3, isopropylamine (East China), triethylamine, and isopropyl alcohol were 12664, 16649, and 7460 yuan/ton, which is +15.8%, +14.5%, and +15.4% over 2023Q2. Isopropylamine prices rose in the third quarter, mainly due to the downstream glyphosate boom and the impact of the maintenance of isopropylamine manufacturers; the rise in triethylamine prices was mainly due to the impact of downstream VC inventory replenishment. Benefiting from rising prices of isopropylamine and triethylamine, the average sales prices of fatty amines, organic solvents, and synthetic fragrances in 2023Q3 companies were 12298, 7830, and 33156 yuan/ton, with year-on-year changes of -2.4%, -4.0%, and -8.0%, respectively, +6.5%, +6.3%, and -2.5% month-on-month. The sales volume of fatty amines, organic solvents, and synthetic fragrances of 2023Q3 was 19943, 16001, and 3555 tons, with year-on-year changes of -23.5%, +42.6%, and +5.9%, with month-on-month changes of -18.7%, -0.9%, and +13.3%. Among them, sales of fatty amines declined significantly.
Due to rising prices of major products, 2023Q3 had a gross sales margin of 26.2% (+4.8% yoy, +3.6% yoy) and a net sales margin of 12.1% (+1.1% yoy, +0.4% yoy). The 2023Q3 corporate fee rate for the period was 11.4% (+3.1% yoy, +1.2% yoy)
The company's ongoing projects are progressing steadily. Major projects such as the company's ocean base pilot, 6,000 ton flame retardant expansion project, 100,000 tons of isopropylamine intelligent transformation project, Ningxia Xinhua Fragrance Project, and Ningxia Xinhua Phosphine New Materials Project are progressing in an orderly manner according to the plan. In the field of salt lake lithium extraction, the company, Salt Lake Co., Ltd. and Lanke Lithium signed an industrialization test project for the efficient separation (extraction method) of lithium concentrate mother liquor. The project was successfully put into operation in early July, and has successfully tested and produced a qualified product. In the field of lithium battery recycling, the company reached an agreement with Jiangsu Yaoning Renewable Energy Co., Ltd. and Shanghai Tianqian Consulting Management Partnership on matters relating to the joint investment and establishment of a joint venture in Jiande City to carry out lithium battery resource recycling.
In order to further promote the company's strategic development, enhance the company's industry position, and expand upstream and downstream industries, the company implemented waste electrode and battery resource recycling projects through its holding subsidiary Zhejiang Xinyao Recycling Technology Co., Ltd., and Xinhua holds 51% of the shares. Investment amount and source: The total investment planned for this project is 600 million yuan (the actual investment amount shall prevail in the end). The sources of capital are own capital, parent company loans, and financing (including but not limited to bank project loans, etc.). The scale and content of construction include waste electrode and battery resource recycling projects, including production equipment, auxiliary production equipment, and service facilities. The first phase of the project is 10,000 tons of waste battery LFP electrodes, and the second phase of the project is 40,000 tons of waste battery LFP black powder. The project is being constructed in two phases. The construction cycle for the first phase is estimated to be 12 months, and the construction cycle for the second phase is expected to be 18 months (ultimately subject to actual construction conditions).
The company's original main business was aliphatic amines and organic solvents. As the company plans to gradually deploy production capacity for flavors and fragrances, and further broadens channels for lithium extraction and lithium battery recycling in salt lakes, the company has broad room for growth. It is estimated that the net profit attributable to the company from 2023-2025 will be 2.7, 4.0 million and 520 million yuan respectively, maintaining the “buy” rating.
Risk warning
1. The progress of the project fell short of expectations;
2. Downstream demand fell short of expectations.