Description of the event

The company released its three-quarter report for 2023, achieving revenue of 62.7 yuan (-3.0% year-on-year), attributable net profit of 690 million yuan (-9.2% year-on-year), and attributable non-net profit of 680 million yuan (-9.8% year-on-year). Among them, Q3 achieved revenue of 1.97 billion yuan in a single quarter (-18.8% yoy, -12.3% yoy), 184 million yuan (-30.1% yoy, -33.1% yoy), and realized imputable non-net profit of 178 million yuan (-32.3% yoy, -34.9% yoy).

Incident comments

The volume and price of special tires and new polyurethane materials have risen sharply, and fluoropolymers are slightly under pressure. 2023Q3, the company's sales revenue of PTFE resin, fluorine rubber, fluorine gas, rubber sealing products, special tires, new polyurethane materials and special coatings changed month-on-month by -16.0%, -4.7%, +13.0%, -11.0%, +20.4%, +57.4%, and -12.5%, respectively. Among them, special tires and new polyurethane materials all showed a sharp rise in volume and price. Q3 sales of special tires were +5.4% month-on-month, and the average product price was +14.2% month-on-month; Q3 sales of new polyurethane materials were +56.6% month-on-month, and the average product price was +0.5% month-on-month. Due to the downturn in the industry, polymers are under slight pressure. PTFE resin Q3 sales volume is -12.4%, the average product price is -4.1% month-on-month; the sales volume of fluorine rubber is +7.7% month-on-month, and the average product price is -11.5% month-on-month.

Gross margin increased slightly month-on-month, and net interest rate declined. 2023Q3 The company's gross margin for a single quarter was 26.1% (yoy +1.9pct, +0.3pct month-on-month); net profit margin was 9.3% (y-1.9pct, month-on-month -2.9pct). In 2023Q3, the total of the company's three rates was 9.9% (+4.1pct year-on-year, +2.9pct month-on-month), mainly due to the increase in the company's management expenses and financial expenses.

The planning projects of various institutions are progressing steadily. In terms of planning projects, at present, the Haohua Gas 4,600 tons/year electronic gas project and the Zhonghao Chenguang 2,500 tons/year PVDF project have been completed and put into operation, and the company is actively promoting product production and market development. Industrialization projects such as the Shuguangyuan 100,000 tire/year civil aviation tire project, the Southwest China Clean Energy Catalytic Materials Industrialization Base Project, and the Northwest China Silicone Sealant Profile Project are under construction and are scheduled to be completed and put into operation by the end of the year. The 26,000 tons/year high-performance organic fluorine material project of Zhonghao Chenguang along the beach has entered a critical construction period.

The proposed acquisition of Sinochem Blue Sky Pricing will bring growth through fund-raising projects. The company plans to purchase 52.8% and 47.2% of its shares in Sinochem Blue Sky from Sinochem Group and Sinochem Asset. The transaction price of the asset Sinochem Blue Sky, which is the subject of this restructuring, is 7.24 billion yuan. The issue price is 37.07 yuan/share, and the listed company will issue an additional 195 million shares. After issuance (not considering fundraising), China Haohua's shareholding ratio dropped from 64.8% to 53.3%, with Sinochem Group and Sinochem Asset holding 9.3% and 8.3% respectively; 2) The company plans to privately issue no more than 7.24 billion yuan of supporting funds to no more than 35 eligible specific investors, including Foreign Trade Trust and Sinochem Capital Venture Capital, for the “New 20,000 tons/year PVDF Project”, “200,000 tons/year PVDF project (phase I)”, “200,000 tons/year of lithium-ion battery electrolyte project (phase I)”, “19,000 tons/year VDF, 15,000 tons of PVDF and 15,000 tons of PVDF and 15,000 tons of PVDF, respectively. Package 3.6 Projects such as the 10,000 ton HCFC-142b raw material project (phase II)” and additional working capital or debt repayment. The transaction will promote deep integration between the listed company and the target company's fluorine chemical business and further enhance the synergy effect.

Investment suggestion: The company is a technology-leading new materials platform enterprise. The acquisition of Sinochem Blue Sky, a high-quality fluorine chemical standard, will help it to take its comprehensive strength to the next level. The company's net profit attributable to 2023-2025 is estimated to be 10.9 billion yuan, 13.5 billion yuan, and 1.70 billion yuan respectively (Sinochem Blue Sky's merger report has not yet been considered), maintaining the “buy” rating.

Risk warning

1. The progress of the project fell short of expectations;

2. The risk of lack of technical advantages.