Q3 profit fell 82.36%, waiting for COC industrialization to be implemented, maintaining the “buy” rating company to achieve revenue of 414 million yuan in the first three quarters of 2023, -28.39%; net profit of 214.098 million yuan, -79.48% year-on-year. Among them, Q3 achieved revenue of 134 million yuan in a single quarter, -20.07% year-on-year; net profit of 5.2276 million yuan, -82.36% year-on-year. Due to the decline in raw material prices, the main market is in a period of slump in the industry. As a result, the prices of the company's products have also dropped sharply, and the company's performance has declined cyclically. We maintain the company's profit forecast. We expect the company's net profit from 2023-2025 to be 0.44, 1.63, and 482 million yuan, corresponding to EPS of 0.50, 1.86, and 5.48 yuan/share. The current stock price corresponding to PE is 92.3, 24.8, and 8.4 times. We are optimistic that the company's COC new materials industrialization breakthrough is imminent. The prospects are promising, and the “buy” rating will be maintained.
The polyetheramine boom is declining, and the market is expected to bottom out and pick up in the future
In the first three quarters of 2023, the sales volume of the company's main products, fatty amines and optical materials, was 15,769 and 3,846 tons, respectively; sales revenue was 2.73 billion yuan and 140 million yuan, respectively; sales revenue was 2.73 billion yuan and 140 million yuan, respectively, -31.7% and -20.9%; average sales prices (excluding tax) were 17,316 and 36,381 yuan/ton, respectively, -42.39% and -32.32%, respectively. Prices of the company's main raw materials such as propylene oxide, propylene glycol, and camphene have also declined to a certain extent. The company's overall gross margin for the first three quarters of 2023 was 15.18% and net profit margin was 5.03%. The company's gross profit margin and net profit margin levels are close to the lowest point since 2011, and market conditions are expected to bottom out and pick up in the future.
COC's intended orders have exceeded expectations, and prices, costs, or strong competitiveness. According to the company's announcement, the company's COC products have signed intended cooperation agreements with many well-known enterprises in downstream applications. In the field of optics, the company has reached an agreement of intent with a listed company that produces optical components related to automotive HUDs, agreeing on a future procurement plan of at least 2,500 tons per year. The company's samples have been tested by several downstream mobile phone optical lens companies, and the response has been good. At present, agreements of intent have been reached with well-known listed companies. In the medical field, the company has reached agreements of intent with well-known downstream pharmaceutical companies. The price of the Japanese manufacturer's COC variety (APL-5014CL) is 120,000 yuan/ton, while the company's benchmark product is expected to sell at around 80,000 yuan/ton. Compared with the pricing of Japanese manufacturers, it is expected to have strong price and cost advantages. This will help change the COC supply pattern, and the reduction in localization costs is expected to open up more room for new demand.
Risk warning: raw material prices fluctuate, demand growth falls short of expectations, COC/COP development falls short of expectations, etc.