Description of the event
The company released the three-quarter report: Revenue for the first three quarters of 2023 was about 2.76 billion yuan, down 9% year on year, imputed net profit was about 54 million yuan, up 162% year on year, and net profit after deducting about 36 million yuan, up 200% year on year. Revenue for the third quarter of 2023 was about 1.03 billion yuan, down 12% year on year, imputed net profit was about 0.06 billion yuan, down 7% year on year, and net profit after deducting about 0.04 billion yuan, down 20% year on year.
Incident comments
The profit of the main viscose fiber business improved, and financial expenses and Baojing subsidiaries dragged down performance. The company's gross margin for the first three quarters was about 13.7%, up 5.9 percentage points from the previous year. This mainly contributed to viscose filament due to rising prices and falling costs of viscose filament. The company's expenses for the first three quarters were about 10.5%, up 2.6 percentage points year on year. Among them, sales, management, R&D, and financial expenses changed by +0.6%, +0.5%, -0.04%, and +1.6%, respectively. In the end, the net interest rate imputed for the first three quarters was about 2.0%, up 4.9 percentage points from the previous year. Looking at the third quarter alone, the company's gross margin was about 14.7%, continuing to rise 1.6 percentage points from the previous month and 6.9 percentage points from the previous year. The profit of the main viscose fiber business improved further. The company's expense ratio for the third quarter period was about 11.0%, an increase of 4.8 percentage points over the previous year, mainly due to a 3.1 percentage point increase in the financial expenses rate over the same period last year. In addition, under the influence of market downturn and scarcity, Jilin Baojing continued to operate poorly in the third quarter, and the company lost 11.58 million yuan in net investment income in the company's profit statement (considering that Qifeng's chemical fiber business is still excellent, the impact of Jilin Baojing's losses may be greater). In addition, bad prepaid accounts and falling carbon fiber inventory prices caused the company to accrue asset impairment losses of about 7 million yuan, and the company's estimated credit impairment losses of about 14 million yuan. In the end, the company's net interest rate for the 3rd quarter was about 0.6%, about the same as the previous year.
Industry prices continue to fall, and short-term profits of enterprises are under pressure. According to Baichuan, since last year's high, the tax-inclusive price of large-filament carbon fiber has dropped from about 150,000 yuan/ton to 75,000 yuan/ton, a cumulative decrease of about 50%. The tax-inclusive price of the small-filament carbon fiber T700 has dropped from 270,000 yuan/ton to 145,000 yuan/ton, with a cumulative decrease of about 46%. The reason for the decline in the price of large-filament carbon fiber is the weakening of wind power demand (a sharp decline in overseas installations plus the decline in sea breezes after installation in 2021), while carbon fiber production capacity in Jilin has increased dramatically. The reason for the decline in the price of small-filament carbon fiber is that some demand has weakened. First, global demand for carbon fiber for leisure and sports, supported by the Winter Olympics, has declined this year, and more large-fiber carbon fiber is being used; second, demand in the photovoltaic sector has weakened, and non-crucible thermal field components are experimenting with the use of large-fiber carbon fiber. Under the influence of falling prices, carbon fiber companies' profitability is under pressure. For example, net profit attributable to Zhongfu Condor for the 3rd quarter fell 65% year on year, and Jilin Carbon Valley's net profit for the 3rd quarter fell 73% year on year. The company's current carbon fiber business profitability may also continue to be under pressure from the first half of the year (carbon fiber gross profit margin in the first half of the year was 3%).
The cost advantage is remarkable, and it is expected to benefit from the optimization of the industry pattern. Under current prices, carbon companies may generally fall into deep losses, and some have begun to cut production and discontinue production, while companies have supporting advantages such as raw wire and equipment, with significant cost advantages, and are expected to benefit from the optimization of the industry pattern. The estimated net profit attributable to the company in 2023-2024 is 0.8 to 190 million yuan, with a corresponding valuation of 98 or 42 times.
Risk warning
1. The progress of carbon fiber business falls short of expectations;
2. Prices of raw materials fluctuate greatly.