Incident: The company released its 2023 annual report. In 2023, the company achieved revenue of 2.66 billion yuan, +1.8% year-on-year, and net profit to mother of 282 million yuan, +3.1% year-on-year.
Overall performance is steady, and the chemical business boom is picking up. In '23, the company achieved operating income of 2,657 billion yuan, and realized net profit of 282 million yuan, +3.07% year-on-year, after deducting non-net profit of 273 million yuan, or +4.73% year-on-year. By business, the aldoxylate and residual liquid processing businesses achieved revenue of 1,384 million yuan and 436 million yuan, respectively; the butyl octanol market was steady, moderate and positive in the second half of '23, and the average sales price of the company's aldoxide esters and residual liquid processing increased 5.45% and 13.93%, respectively, from the first half of the year.
The financial situation is healthy, and shareholder returns are enhanced. As of the end of 2023, the company's balance ratio was only 17.8%, and there were no short- or long-term loans. In terms of dividends, the company plans to distribute a cash dividend of RMB 3.00 (tax included) to all shareholders for every 10 shares, totaling RMB 195 million. Based on the closing price on March 22, the company's dividend rate reached 5.4%. In addition, the company plans to launch a semi-annual dividend for 2024 and has formulated a shareholder return plan for the next three years (2024-2026). On the premise that certain conditions are met, it is stipulated that the company's cumulative profit distribution in cash in 2024-2026 is not less than 30% of the average annual distribution profit achieved in the last three years.
It is planned to invest 720 million to continue increasing production capacity. The company's holding subsidiary 3D Longbang plans to invest in two major technical improvement projects:
(1) It is proposed to invest 402 million yuan to optimize and upgrade the product structure and technological transformation of 2,400 tons/year butyric anhydride plant and supporting facilities. After the completion of the project transformation, the production capacity will be: 10,000 tons of butyric anhydride, 10,000 tons of n-butyric acid, 50,000 tons of isobutyric acid, and 15832 tons of mixed alcohol aldehyde (export sales of isoctanoic acid and mixed aldol, other personal use). It is scheduled to be completed in December '24. (2) It is proposed to invest 320 million yuan to optimize the product structure and upgrade the technology of the 1000 tons/year cellulose acetate plant. After the project transformation is completed, the production capacity will increase to 15,000 tons/year, that is: 5,000 tons/year of cellulose acetate, 3,000 tons/year of cellulose acetate butyrate, 5,000 tons/year, and cross-linked sodium carboxymethylcellulose; at the same time, it is planned to increase the treatment capacity of the light acid recovery unit to 200,000 tons/year, and is scheduled to be completed in December '25.
Investment advice and valuation: We expect the company's revenue from 2024 to 2026 to be $3,072 billion, $3,423 billion, and $3,898 billion respectively, with revenue growth rates reaching 15.6%, 11.4%, and 13.9% respectively. Net profit to mother is 352 million yuan, 396 million yuan, and 496 million yuan respectively. Growth rates will reach 24.7%, 12.5%, and 25.3% respectively, and the rating will be raised to “buy”.
Risk warning: risk of fluctuations in raw material prices, risk of production safety, risk of hydrogen energy and photothermal projects falling short of expectations.