The company's 2023 performance declined year-on-year, putting pressure on the short term. The company released its 2023 annual report, with 2023 revenue of 27.26 billion yuan (-9.9% YoY), net profit of 3.58 billion yuan (YoY -43.1%), net profit of 3.70 billion yuan (YoY -42.3%); of these, 2023Q4 revenue of 7.91 billion yuan (+9.4% YoY, +13.3% YoY), net profit to mother 650 million yuan (YoY -14.1%, 4.6.7% YoY), net profit of 80 million yuan (YoY -14.5%, 33.3% YoY) . The gross sales margin for 2023Q4 was 17.8% (-0.9 pct year over year, -6.6 pct month on month), and the net sales margin was 8.8% (-1.6 pct year on year, -8.6 pct month on month); sales, management, R&D, and finance expenses were 0.3%, 1.7%, and 0.4%, respectively, with a total cost ratio of 3.6% (+1.0 pct year on year, -0.03 pct month on month).
The production and sales volume of the company's main products increased year-on-year in 2023. Thanks to the commissioning of new projects and technical reform and capacity expansion, the production and sales volume of the company's main products increased year-on-year in 2023. In 2023, the company produced 394.8/356.7/52.4/755,000 tons of new energy materials/fertiliser/organic amine/acetic acid and derivatives, respectively (+30%/+15%/+17%/+29%), and sales volume 217.9/326.0/52.2/715,000 tons (+20%/+15%/+9%/+24% year-on-year).
In 2023, the prices of the company's products and raw materials all declined year on year, and the gross margin of fertilizer, organic amine, acetic acid and derivatives all declined year on year. In 2023, the chemical industry faced the challenges of weak demand and oversupply. The industry sentiment declined, and corporate profitability was under pressure. In 2023, the price ranges of the company's main products urea, caprolactam, adipic acid, DMF, acetic acid, and dimethyl carbonate were 1810-2940, 7650-12740, 7400-10000, 3600-6900, 2260-4300, 3190-6120 yuan/ton respectively. Affected by factors such as oversupply in the market, the product prices all decreased year on year; the price ranges of coal, benzene and propylene as the main raw materials were 710-1290, 5420-7820, 5340-6840 yuan/ton, respectively. Due to factors such as crude oil prices, prices all declined year on year. In 2023, the company's revenue for new energy materials/fertiliser/organic amine/acetic acid and derivatives was 154.76/26.75/2.052 billion yuan (YoY +5.6%/+2.9%/-55.4%/-2.6%, accounting for 57%/21%/10%/8%), with gross margins of 17.24%/35.07%/12.87%/20.95%, respectively (+1.9/-4.3/-44.1/-10.0pct).
The new project is progressing smoothly, and the increase in production capacity is gradually being released. In 2023, the first phase of the Jingzhou base project was completed and put into operation. Projects such as high-end solvents and equal-capacity replacement of 3×480 t/h high-efficiency high-capacity coal-fired boilers at the Dezhou headquarters were successfully put into operation, and the first phase of the nylon 66 high-end new material project progressed as scheduled.
Risk warning: Project production falls short of expectations; raw material prices rise; downstream demand falls short of expectations, etc.
Investment advice: Considering that the company's main products are affected by factors such as overcapacity and weak demand, and the profitability is at a low level and short-term improvement is limited, we lowered the company's profit forecast for 2024-2025 and added the 2026 profit forecast, that is, the net profit forecast for 2024-2026 was 44.4/47.5/4.99 billion yuan (the original 2024-2025 forecast value was 58.6/7.58 billion yuan). The corresponding EPS is 2.1/2.2/2.4 yuan, corresponding to the current stock price PE is 12.5/ 11.7/11.1X, maintaining a “buy” rating.