Description of the event
The company released its three-quarter report for 2023, achieving revenue of 2.61 billion yuan (-30.8% year-on-year), attributable net profit of 240 million yuan (-48.4% year-on-year), and attributable non-net profit of 170 million yuan (-60.9% year-on-year). Among them, Q3 achieved revenue of 870 million yuan in a single quarter (-27.2% y/y, -9.0%), imputed net profit of 108 million yuan (-8.0% yoy, -1.3% yoy), and realized imputable non-net profit of 44 million yuan (-62.0% yoy, -57.3% yoy). Among them, the capital usage fees charged to non-financial enterprises, which include current profit and loss in non-recurring profit and loss, were 83.56 million yuan.
Incident comments
2023Q3 refrigerant is in a low season for new markets. Prices and price spreads have declined slightly from month to month, and the purchase price of fluorite on the cost side has risen.
In terms of refrigerants, in the 2023Q3 quarter, the company's refrigerant sales volume was 35,000 tons, -21.9% year-on-year, -1.7% month-on-month; the average refrigerant sales price was 19,000 yuan/ton, -18.2% year-on-year and -8.1% month-on-month. In the third quarter, the refrigerants industry was in a low season for new markets. Sales declined slightly, and product price spreads declined somewhat. In 2023Q3, R22, R32, R134a, and R125 were all -2.1%, -3.3%, -5.2%, -10.2%, -10.2% to 19321, 14125, 22408, and 22321 yuan/ton. The average price difference was -1.7%, -28.7%, -5.7%, and -11.6% to 10662, 1568, 6510, and 8105 yuan/ton. In terms of fluorine foaming agents, in the single quarter of 2023Q3, the company's foaming agent sales volume was 0.17 million tons, -47.3% year-on-year, -17.0%. The average sales price of foaming agents was 20,000 yuan/ton, +23.9% year-on-year, and -13.7% month-on-month. On the cost side, in the 2023Q3 quarter, the company's raw material fluorite powder price was +1.9% month-on-month, trichloroethylene price -9.9% month-on-month, perchloroethylene price -26.0% month-on-month, and methylene chloride price -0.9% month-on-month. Overall, in the 2023Q3 quarter, the company's gross margin was 12.9%, +3.1% year-on-year and -1.0% month-on-month.
Quotas have been implemented, and refrigerant prices and price spreads have gradually begun. On September 21, 2023, the Ministry of Ecology and Environment's website published a notice seeking public comments on the “2024 Total HFC Quota Setting and Allocation Implementation Plan (Draft for Comments)”, which was reviewed and approved in principle on October 24. We believe that the relevant policies are very beneficial to the supply side in terms of total distribution volume and quota adjustments. As of October 27, the average prices of R22, R32, R134a, and R125 in October were +2.2%, +17.1%, +19.8%, and +15.9% compared to the average prices of the third quarter; the average price difference in October was -14.9%, +46.7%, +13.3%, and +20.7% compared to the average price difference in the third quarter. Recently, benefiting from rising prices of raw materials such as fluorite and the implementation of quotas, etc., prices have begun gradually. It is expected that the third generation of refrigerants will enter a long-term boom cycle.
The company's fluorine-containing polymer materials and fluorine-containing fine chemicals projects are progressing steadily. According to the company's project plan, the 6,000t/a lithium hexafluorophosphate (LiPF6) project is expected to enter trial production in the first quarter of 2024; the 5,000t/a polyperfluoroethylene propylene (FEP) and 5,000t/a polyvinylidene fluoride (PVDF) projects are expected to enter trial production around December 2024; Shengmei Lithium Battery's annual production of 3,000t/a lithium bifluorosulimide (LiFSI) project, phase I is 500t/a, and is expected to begin trial production in the fourth quarter of 2023; Morita's 20,000 tons/year of high-purity electronics For the hydrofluoric acid project, downstream customer certification requirements are high and the cycle time is long, and the certification progress falls short of expectations.
The boom in third-generation refrigerants is expected to improve over a long period of time. The company has a high share of mainstream products on the market, which has a significant advantage. The net profit attributable for 2023-2025 is estimated to be 3.6/75/ $1.19 billion, maintaining the “buy” rating.
Risk warning
1. The progress of the new project falls short of expectations;
2. The development of the refrigerant industry fell short of expectations.