Event: The company released its 2023 three-quarter report. From January to September 2023, the company achieved revenue of 536 million yuan, -43.01% year-on-year, net profit of 121 million yuan, net profit of 121 million yuan, or -54.23% year-on-year. In Q3 of 2023, the company achieved revenue of 144 million yuan, -47.75%, -13.12% month-on-month, net profit of 0.19 million yuan, -74% year-on-year, and -59.41% month-on-month.
Demand in the downstream market has weakened, and the volume and price of main products have fallen sharply, putting pressure on performance. From January to September 2023, the export sales volume of the company's functional additives and phenylchlorosilane products was 6480.55 and 1592.96 tons, -28.42% and -7.64%, respectively. The average sales prices were 5.57 and 42,800 yuan/ton, respectively, -31.98% and -30.08%, with revenue of 3.61 and 68 million yuan, respectively, -51.31% and -35.42% of the same period. From January to September 2023, due to the slowdown in macroeconomic growth, demand for downstream silicone products weakened, and the volume and price of the company's main products fell sharply, causing the bottom of the company's performance to come under pressure.
Prices of main products declined month-on-month in the third quarter, and sales of silicone additives increased slightly month-on-month. In Q3 of 2023, the sales volume of the company's functional additives and phenylchlorosilane products was 2226.2 and 328.52 tons, respectively, +10.91% and -23.53% over the previous year. The average sales prices were 4.06 and 28,900 yuan/ton, respectively, -28% and -40.69% over the previous year. Prices of main products continued to be under pressure in the third quarter, but sales in the functional additives sector improved month-on-month. As a leader in the silicone functional additives segment, the company's production capacity of hexamethyldisilazane products is in a leading position in the world, and the competitive advantage of the industry is remarkable. Currently, it is mainly affected by continued weak demand in the downstream silicone industry, and performance is under pressure due to falling prices.
Extend the industrial chain layout of phenyl silicone materials. Compared with methyl silicone rubber and methyl silicone oil, phenyl silicone materials have superior properties such as high and low temperature resistance, weather resistance, and radiation resistance. According to the “Guiding Catalogue for Industrial Structure Adjustment (2023 version, draft for comments)” issued by the National Development and Reform Commission in July 2023, phenyl silicone materials are also a type of industry encouraged by the country. The company is the first to achieve direct production of phenylchlorosilane in China. Currently, the production capacity of phenylchlorosilane monomers is 15,000 tons/year. It currently has the only direct production line in China that simultaneously produces phenyltrichlorosilane and diphenyldichlorosilane, and plans to build downstream deep-processing products such as phenyl silicone rubber, phenyl silicone oil, and phenyl silicone resin products with a production capacity of 5,000, 5000, and 6000 tons/year.
Investment suggestions: We expect the company's net profit from 2023-2025 to be 1.57/2.89/414 million yuan, EPS is 0.69/1.28/1.83, and corresponding PE is 34/19/13 times, respectively. Considering that the company is the leader in the silicone additives industry segment while deepening the phenyl silicone material industry chain layout, future growth can still be expected. Maintain a “buy” rating.
Risk warning: the progress of projects under construction falls short of expectations; downstream demand growth falls short of expectations; raw material prices have risen sharply; the international situation is tense and exports are limited;