Incidents:
On October 27, the company released its 2023 three-quarter report: in the first three quarters of 2023, the company achieved operating income of 1,406 million yuan, -18.31% year-on-year; realized net profit of 235 million yuan, or -38.01%; and the weighted average return on net assets was 9.03%, down 6.55 percentage points from the previous year. Gross profit margin was 24.10%, up 0.49 percentage points year on year; net sales profit margin was 16.69 percent, down 5.31 percentage points year on year.
Among them, Q3 in 2023 achieved revenue of 509 million yuan, +3.82% year-on-month, +9.48%; realized net profit of 85 million yuan, +3.14% year-on-year, +18.49%; and average return on net assets was 3.41%, a decrease of 0.22 percentage points over the previous year and an increase of 0.64 percentage points over the previous year. The gross profit margin on sales was 25.80%, up 5.98 percentage points year on year, up 3.64 percentage points year on month; net sales profit margin was 16.61 percent, down 0.11 percentage points year on year, and up 1.27 percentage points month on month.
Investment highlights:
The results for the third quarter increased month-on-month. It is optimistic that the fourth quarter's profit will continue to improve in Q3 of 2023. The company achieved revenue of 509 million yuan, +3.82% year-on-year, +9.48% month-on-month; realized net profit of 85 million yuan, +3.14% year-on-year, +18.49% month-on-month, +0.3 billion yuan, and +0.3 billion yuan month-on-month. Among them, Q3 in 2023 achieved gross profit of 131 million yuan, +0.28 million yuan; R&D expenses reached 119 million yuan, +03 billion yuan; financial expenses reached 200 million yuan, +03 billion yuan; other revenue reached 02 billion yuan, -03 billion yuan; and income tax reached 011 million yuan, an increase of 0.4 billion yuan over the previous month. Gross profit increased month-on-month, or due to an increase in sales volume in the company's small variety sector, while profitability gradually improved. The month-on-month increase in financial expenses may be due to a decrease in exchange earnings. Looking ahead to the fourth quarter, the company's performance is expected to continue to improve as production and sales of large products with weak profitability are gradually discontinued, and the efficiency of small-variety production capacity is gradually released.
In terms of the period expense ratio, the company's sales/management/finance expense ratio in 2023Q3 was 0.44%/6.48%/0.03% respectively, year-on-year -0.11/-0.81/+1.94pct, and -0.04/+0.23/+0.63pct month-on-month.
Deeply cultivate the field of small varieties and actively explore new varieties and sectors
As the company gradually withdraws from the production of large varieties of products in the water reducing agent sector, the company will adhere to the business strategy of creating profit from small varieties, continue to deepen the field of small varieties, and actively explore new varieties, new categories, and new sectors. After years of practice, the company has formed a management system that revolves around sector development and operates in a systematic manner. Through the layout of products in the cultivation stage, growth stage, and maturity stage, etc., it promotes the sustainable development of the enterprise. As of 2023H1, the company has formed 16 major sectors and is continuously developing new products in new segments. Among them, application sectors such as polyetheramine and high-end electronic chemicals are in the accelerated development stage. In terms of sales volume, in Q3 of 2023, the company's small variety segment achieved sales volume of 37,400 tons, +17.82% year-on-year and +35.03% month-on-month. On the production capacity side, the company has an annual production capacity of nearly 300,000 tons of special surfactants. At the same time, in the first half of 2023, the company successfully promoted the commencement of construction of the “third plant” of the Real Madrid Kaimeike high-end functional new materials project, preparing production capacity for medium- to long-term development.
Stock repurchases continue, demonstrating confidence in the company's development
On April 29, the company issued an announcement on the share repurchase plan through centralized bidding transactions. The total amount of capital the company plans to repurchase is not less than RMB 40 million, no more than RMB 80 million, and the repurchase price is no more than RMB 18 per share. The repurchase price of the shares will not exceed RMB 18 per share. The purpose of this repurchase of shares will be used for subsequent employee shareholding plans. This repurchase shows confidence in the company's future development prospects and high recognition of the company's value, further enhances the company's value, and enhances investor confidence. At the same time, it is also conducive to establishing and perfecting the company's long-term incentive mechanism, fully mobilizing the enthusiasm of the company's employees, effectively integrating shareholders' interests, company interests and individual employees' interests, and promoting the company's healthy and sustainable development. After the announcement of the repurchase plan, the company's share repurchases continued. As of September 30, 2023, the number of shares the company had repurchased was 3.8852 million shares, with a total transaction amount of 39.9985 million yuan.
The profit forecast and investment rating comprehensively consider the company's business situation in the first three quarters. We have appropriately lowered the company's profit forecast. The company's net profit for 2023-2025 is estimated to be 3.39, 4.81, and 602 million yuan respectively, corresponding to PE 19, 14, and 11 times, respectively. Considering that the company is actively developing new varieties and sectors in the small variety field, reflecting medium- to long-term growth, and maintaining a “buy” rating.
Risk indicates policy implementation, new capacity construction progress falling short of expectations, new capacity contribution performance falling short of expectations, fluctuations in raw material prices, changes in environmental protection policies, and a sharp decline in the economy.