A leading enterprise in the integrated layout of the fluorine chemical industry chain. At this stage, the company has three business segments: chemical raw materials, fluorocarbon chemicals, and fluoropolymer materials, accounting for 13.1%, 54.1%, and 30.4% of revenue for the first three quarters of 2023, respectively. Based on the five major production bases in Jinhua, Inner Mongolia, Shaowu, Quzhou and Jiangxi, the company has basically achieved an integrated layout of the entire industry chain from upstream fluorite resources to midstream hydrofluoric acid, methane chloride and fluorocarbon chemicals to fluorinated polymer materials.
The third-generation refrigerant quota has been officially implemented, and the company is expected to benefit from rising industry prosperity. According to data from the Ministry of Ecology and Environment, the company's production quotas for HFC-32, HFC-125, HFC-134a, HFC-143a, HFC-152a, and HFC-227ea in 2024 were 0.58, 0.64, 1.09, 1.44, 1.06, and 0.72 million tons, respectively. The supply and demand pattern for third-generation refrigerants will improve markedly after entering the quota management period, and profitability is expected to gradually recover. In addition, the company plans to issue shares to specific targets in 2023, raising no more than 1.9 billion yuan in total capital for the Baotou Yonghe New Materials Industrial Park project, and forward-looking layout of the fourth-generation refrigerants HFO-1234yf (20,000 tons/year), HFO-1234ze (13,000 tons/year), and HCFO-1233zd (10,000 tons/year).
The refinancing focuses on fluorinated polymer materials to inject long-term development momentum into the company. The fluorinated polymer materials currently deployed by the company include PTFE, FEP, and PFA. As of the 23 semi-annual report, the company has an annual production capacity of 59,300 tons of fluorinated polymer materials and monomers, and a production capacity of more than 40,000 tons under construction. In 2022, the company issued convertible bonds to raise funds to invest in the construction of Shao Wuyong's fluorine chemical production base projects such as new environmentally friendly refrigerants and fluoropolymers, and expansion projects with an annual output of 10 kt polyvinylidene fluoride and 3 kt hexafluoroethylene. The current share conversion price is 23.83 yuan/share. With the gradual commissioning of production capacity under construction, the company's fluorinated polymer materials business is expected to become an important driving force for the company's performance. The company's fluoropolymer materials business revenue is estimated to be 14.1/25.3/3.12 billion yuan in 2023-2025.
We expect that in 2023/2024/2025, the company will achieve operating income of 4,544 billion/ 5.811 billion/ 6.797 billion yuan, year-on-year, +19.45%/+27.89%/+16.97%, net profit to mother of 251 million/626 million/847 million yuan, -16.47%/+35.34% year-on-year, corresponding EPS of 0.66/1.65/2.23 billion yuan. Considering that the company is a leading company in the integrated layout of fluorine chemicals and that the boom in the third-generation refrigerant industry continues to rise, the company was given 22 times PE in 2024, with a target price of 36.31 yuan, giving the company an “increase in weight” rating.
The construction and commissioning progress of the project fell short of expectations; the risk that the price increase of third-generation refrigerants fell short of expectations; the implementation of the quota management policy fell short of expectations; increased industry competition; the risk that downstream demand fell short of expectations; raw material prices fluctuated; exchange rate fluctuations; and the ban on the company's restricted shares was lifted for a large amount in July '24.