Incident: The company released its 2023 performance forecast. It is expected to achieve net profit of 1.36 billion yuan to 1.46 billion yuan in 2023, down 75.05%-76.76% year on year, net profit after deducting 1.28 billion yuan to 1.38 billion yuan, down 77.20%-78.85% year on year; of these, net profit to mother was 426 million yuan to 526 million yuan in a single quarter, up 31.1-61.8% month on month, in line with expectations.
The agrochemical and silicone market sentiment declined sharply, and annual performance declined significantly. During the reporting period, due to changes in macroeconomics and market supply and demand, the market sentiment of the company's agrochemical sector and silicone sector declined markedly, while sales prices and production and sales volume of products such as glyphosate raw drugs and silicone DMC also declined to varying degrees year-on-year, leading to a marked decline in the sector's profit level. Since the third quarter, the agrochemical sector market has gradually picked up, and product profitability has increased, driving the company's operating performance to achieve significant month-on-month growth for two consecutive quarters.
The company's specialty chemicals sector was relatively less affected by macroeconomics. Overall, it maintained a steady development trend, and was an important source of the company's performance during the reporting period. The company continues to consolidate the phosphorus, silicon and sulfur fine chemical industry chain and accelerate the transformation and upgrading to a new technology-based green chemical materials enterprise.
Prices of some products continued to rise in the fourth quarter, and performance increased sharply from month to month. The average market prices of 2023Q4's main products yellow phosphorus, monoammonium phosphate, diammonium phosphate, phosphate ore, silicone DMC, and sodium hexametaphosphate rose 2.0%, 18.9%, 6.5%, 10.3%, 5.6%, and 0.1%, respectively, in 2023Q3; the average prices for glyphosate and sodium tripolyphosphate fell 13.7% and 1.4%, respectively. Currently, the phosphate ore market continues to maintain a high level of prosperity. As the off-season begins, the price of monoammonium phosphate has dropped, and the price of diammonium phosphate remains stable; demand in the glyphosate market continues to be weak, and there is limited room for further decline under cost support; the silicone market is running steadily. With the industry's low start-up and low inventory, the price promotion mentality of individual manufacturers is still strong.
The company's key projects are progressing steadily, and future growth attributes will continue to increase. In 2023, the company's Hubei Xingrui 550 tons/year silicone microcapsule pilot production line was completed in March, and mass sales have been achieved; Hubei Ruijia's 200,000 tons/year RTV project (phase I) was completed in mid-July and entered the trial operation stage; the company's phosphating agent project completed 800 tons/year trial and is carrying out 5,000 tons/year industrialization device design; the company's 5,000 m3/year aerogel felt project, holding subsidiary Hubei Xingyou 200,000 tons/year battery-grade iron phosphate project, and participation in Hubei Xingyou 300,000 tons/year iron phosphate project The first phase of the lithium project and the lithium phosphorofluoride industry's 100,000 tons/year battery-grade lithium dihydrogen phosphate project will be completed and put into operation within the year. Inner Mongolia Xingfa's new silicone material integrated recycling project and Hubei Xingrui's 400,000 tons/year silicone new material project are progressing steadily.
Maintain an “overweight” investment rating. Net profit due to mother in 2023-2025 is estimated to be 1.41 billion yuan, 2.28 billion yuan, and 3.21 billion yuan, EPS is 1.27, 2.07, and 2.91 yuan respectively. The PE corresponding to the current stock price is 13.6, 8.4, and 5.9 times, respectively, maintaining the “increase in holdings” investment rating.
Risk warning: downstream demand falls short of expectations, product prices fall, new projects fall short of expectations.