Incident: On March 14, 2024, the company released its 2023 annual report. It achieved revenue of 987 million yuan, -2.33% year over year; net profit to mother of 158 million yuan, -32.63% year over year; deducted non-net profit of 152 million yuan, -32.93% year over year. Among them, the fourth quarter achieved revenue of 259 million yuan, +3.70% year on month, 9.85% month on month; net profit to mother of 0.24 million yuan, -46.69% year on year, -20.29% month on month; after deducting non-net profit of 0.2 million yuan, -52.13% year on year, and -27.25% month on month.
Overall demand for sulfoxide chloride is weak, and the incremental release of aramid monomers is smooth. Sulfoxide chloride is one of the company's main products. Price: According to Baichuan Yingfu data, the average price of sulfoxide chloride was 1,511 yuan/ton in 2023, or -44.73% year-on-year. The price drop was mainly due to weak overall demand in downstream fields including sweeteners and pesticides. Sales volume: According to Baichuan Yingfu data, the sales volume of sulfoxide in 2023 was about 394,400 tons, +5.28% year-on-year; of these, 2023H1 and 2023H2 sold about 20.46 and 189,800 tons, respectively, and were under pressure in the second half of the year. New production capacity was released for aramid monomers, and the capacity utilization rate increased from 76.31% in 2022 to 85.31% in 2023, consolidating its product scale advantage. The chloroacetyl chloride project was completed and put into operation. The total capacity utilization rate of 54,800 tons/year was about 31.38%, and the product scale increased significantly.
Insist on creating high value-added products such as PEKK and LIFSi. The company builds high value-added products. Among them, the PEKK: 1000 tons/year project completed environmental inspection at the end of December 2023, and has now met the conditions for mass production. LiFSi: The company announced the issuance of convertible corporate bonds to unspecified targets to raise no more than 650 million yuan to build a new lithium salt (LiFSi) project for 10,000 tons/year lithium batteries. According to the company's announcement, the construction period of the project is 2 years, and it is expected to be gradually put into operation in 2025.
Investment advice: The company is leading the main product industry, and plans to build new products such as PEKK and LIFSi, with significant increases. We expect the company to achieve operating income of 1,217/17.79/2,276 billion yuan in 2024-2026 and net profit to mother of 2,63/398/516 million yuan, corresponding PE of 24.87/16.43/12.67 times, respectively, to maintain an “increase” rating.
Risk warning: the price of raw materials has risen sharply; the expansion of production of new products such as polyether ketone falls short of expectations; downstream demand falls short of expectations