Event: On October 27, the company released its report for the third quarter of 2023. In the first three quarters of 2023, the company achieved operating income of 2,576 billion yuan, a year-on-year decrease of 5.10%; realized net profit of 141 million yuan, a year-on-year decrease of 39.93%; and realized net profit of 130 million yuan, a year-on-year decrease of 38.84%. Among them, the company achieved net profit of 44 million yuan per quarter in the third quarter, down 37.70% year on year and 21.39% month on month.
In the third quarter, revenue from the company's high-performance water reducing agent business declined year-on-year, while revenue from functional materials increased slightly. In the first three quarters of 2023, the company's high-performance water-reducing agents, and functional materials achieved revenue of 14.79, 0.79, and 359 million yuan respectively, with year-on-year changes of -14.6%, +13.7%, and +0.4%, respectively, compared with the first three quarters of 2022.
High-performance water-reducing agents, high-efficiency water-reducing agents, and functional materials achieved sales volumes of 72.79, 3.75, and 181,900 tons respectively in the first three quarters of 2023, with year-on-year changes of -11.3%, +1.9%, and -3.8%, respectively, compared with the first three quarters of 2022.
The average sales price of high-performance water-reducing agents, high-efficiency water-reducing agents, and functional materials in the first three quarters of 2023 was 2031, 2111, and 1975 yuan/ton, respectively, with year-on-year changes of -3.7%, +11.6%, and +4.4% in the first three quarters of 2022.
The average price and sales volume of the company's high-performance water reducing agent business have declined, causing pressure on the water reducing agent business. Revenue from the company's functional materials business increased slightly.
The company's gross sales margin increased year over year. The company's gross sales margin and net sales margin for the first three quarters of 2023 were 35.04% and 7.71% respectively, with year-on-year changes of +0.89pct and -2.69pct, respectively, compared with the first three quarters of 2022. In terms of raw materials, the average purchase price of ethylene oxide decreased by 15.73% compared to the same period last year, and the average purchase price of formaldehyde increased by 18.84% compared to the same period last year.
The nationwide layout has been further improved to boost overseas business and infrastructure business. According to the company's 2023 semi-annual report, the company's South China production base in Jiangmen, Guangdong has been officially put into operation, and the national production capacity layout has been further improved. The commissioning of the Guangdong Jiangmen base can provide strong support for the company to better serve customers in the “Greater Bay Area” and explore the South China market. In the first half of the year, the company stepped up its business development efforts in the field of infrastructure engineering and participated in the construction of a number of national and local key projects, such as the Jiaozhou Bay Second Undersea Tunnel, Yebatan Hydropower Station, Lufeng Nuclear Power, the new Xiamen Convention and Exhibition Center, and the Pinglu Canal Hub. The company's overseas business has maintained rapid development, achieved significant growth in many “Belt and Road” countries and regions, and has continued to enrich the product range sold in overseas regions.
Investment advice. Due to the slow recovery of domestic real estate and infrastructure, downstream demand for the company's water reducing agent products is weak. We lowered the company's profit forecast. The company's earnings per share for 2023-2025 are expected to be 0.51, 0.66, and 0.85 yuan respectively, corresponding to PE 23.14, 17.92, and 13.99, respectively, maintaining the “buy” rating.
Risk warning: Downstream demand falls short of expectations, project construction progress falls short of expectations, product price fluctuations are at risk.