Incidents:
The company released its report for the third quarter of 2023. The company achieved operating income of 1,565 billion yuan, a year-on-year decrease of 14.81%; realized net profit of 314 million yuan, a year-on-year decrease of 35.44%; 2023Q3 achieved operating income of 535 million yuan, a year-on-year decrease of 2.51%, a year-on-year increase of 1.9%; and realized net profit of 72 million yuan, a year-on-year decrease of 51.89% and a decrease of 60.87% over the previous year.
The gross profit of long-chain binary acid declined, and the company's performance was under pressure in the short term.
The company's main business is long-chain dibasic acids. Previously, long-chain dibasic acids were mainly chemically synthesized. In competition in recent years, biolaw has gradually replaced chemical methods, and the company is the leading supplier of long-chain binary acids for biotechnology in the world. The first three quarters of this year were affected by the international market. The company's long-chain binary acid gross profit declined, compounded by the decline in exchange earnings, and the company's performance declined year-on-year. The company's 40,000 tons/year sebacic acid project was completed in the third quarter of last year. It can be used in textiles, plasticizers, lubricants and other fields.
In the future, with the gradual release of products, the company's leading position in the field of long-chain binary acids will be stabilized.
There are many application scenarios for bio-based polyamide composites. China Merchants orders lay the foundation for performance. The company used bio-based glutanediamine as the core raw material to synthesize a series of polyamide materials such as PA56, PA510, and PA5X, and also developed composite material processing technology with high glass fiber content, thereby improving product strength. Potential application scenarios for bio-based polyamide composites include new energy equipment, transportation logistics, building decoration, etc. In June of this year, the company signed a framework agreement with the China Merchants Bureau. In 2023-2025, the China Merchants Bureau plans to purchase bio-based polyamide resins from the company not less than 10,000 tons, 80,000 tons, and 200,000 tons, respectively. This cooperation is expected to accelerate the application and promotion of the company's bio-based polyamide materials and lay the foundation for the company's performance. At present, the company's projects such as 500,000 tons/year of bio-based glutenediamine and 900,000 tons/year of bio-based polyamide are progressing steadily, providing a guarantee for the subsequent promotion of bio-based composites.
Investment advice:
We expect the company's net profit from 2023-2025 to be 432/7.10/1,114 billion yuan, EPS to be 0.74/1.22/1.91 yuan, and corresponding PE 75/46/29 times, respectively. Considering that the company is a leader in synthetic biology, its main product, long-chain binary acid, has obvious advantages. After the China Merchants Bureau takes a stake, it is expected that bio-based polyamide materials will continue to be released. There is broad room for growth, and the “buy” rating will be maintained.
Risk warning: Prices of long-chain diacid products have fallen, and the amount of polyamide materials released has fallen short of expectations.