The company published three quarterly reports. In the first three quarters of 2023, the company achieved revenue of 2,380 million yuan (-4.76%), net profit of 390 million yuan (-16.12%), net profit of 391 million yuan (-14.91%), net profit of 391 million yuan (-14.91%); in the third quarter, the company achieved revenue of 822 million yuan (-9.26%), net profit of 143 million yuan (-2.88%), net profit of 142 million yuan (-1.86%).
The decline in downstream demand has put pressure on the company's revenue. The year-on-year revenue growth rates for the Q1-Q3 quarter of 2023 were +2.17%, -5.25%, and -9.26%, respectively, and the pressure on the company's revenue growth rate was high. The company's refractory materials are mainly used in the fire-resistant insulation and insulation of kiln linings and facilities in the metallurgy, petrochemical, non-ferrous metals, building materials and machinery manufacturing industries. Since the beginning of the year, due to declining economic efficiency in the steel, cement and other industries, cost pressure has been transmitted to refractory companies. Coupled with increased competition in the same industry, sales prices of refractory products have declined, and the profitability of refractory companies has declined, and the company's performance has also been greatly pressured.
Acquire Qinai Shanghai to enrich the business structure. On the evening of August 21, the company announced that it plans to acquire 100% of the shares of Qinai United Fiber (Shanghai) Co., Ltd. held by UNIFRAX UK HOLDCOLTD, an affiliated company under the same controller, for US$35 million. Qinai Shanghai is mainly engaged in the tailoring, packaging and sales of automotive emission control system packaging liners, including ceramic fiber products and polycrystalline fiber products. Under the acquisition agreement, Qinai Shanghai will add EC products made of hybrid fiber materials and lithium battery ceramic fiber paper business to the existing business. This acquisition will help the company optimize its product portfolio, enrich its business structure, and gradually integrate the controlling shareholders' business in China into the listed company platform.
Investment suggestion: As a leading refractory company in China, the company's ceramic fiber production capacity has now reached 550,000 tons, accounting for 40% of the country's total production capacity, with obvious scale advantages. With the gradual recovery of the downstream industry, demand for the company's products is expected to gradually recover, and performance is expected to re-enter a growth channel. The company's revenue for 2023-2025 is estimated to be 32.46, 35.67 and 3.887 billion yuan respectively, and net profit of 5.33, 6.15 and 685 million yuan respectively, corresponding to PE 14.57, 12.65 and 11.35 times, respectively. First coverage, giving a “buy” rating.
Risk warning: Downstream demand is weakening, industry competition is intensifying, business integration falls short of expectations, etc.