Description of the event
On the evening of March 28, 2024, Silicon Bao Technology released its 2023 annual report. During the reporting period, the company achieved operating income of 2,606 billion yuan, a year-on-year decrease of 3.30%, and net profit to mother of 315 million yuan, an increase of 25.90% over the previous year. The gross profit margin for the year was 25.26%, up 5.78pct year over year. 2023Q4 achieved revenue of 693 million yuan, up 2.64% year on year, down 3.62% month on month, and net profit to mother of 92 million yuan, up 8.47% year on year and 0.44% month on month.
The price of silicone raw materials fell and product production and sales increased. The company's performance increased and gross margin improved in 2023. On the one hand, with the introduction of policies such as security and old city renovation, real estate was completed and repaired in 2023, and the remaining 30,000 tons/year silicone sealant production capacity in the fund-raising project contributed to an increase; the production of construction adhesive/industrial adhesive/silane coupling agents in 2023 was 14.1/3.5/80,000 tons, respectively, compared with +28.00%/+45.38%/+32.32%; construction adhesive/industry The sales volume of glue/silane coupling agents was 13.9/35/80,000 tons respectively, +23.63%/+41.94%/+31.16% year-on-year respectively. The company's production and sales increased dramatically, further stabilizing its position in the industry. After 2022, with the drastic expansion of silicone production capacity, the price of silicone DMC, the most upstream raw material for the company's products, showed a downward trend. In 2023, the average price of silicone DMC was 14,900 per ton, down 37.06% from 2022, while the prices of the company's construction adhesives and industrial adhesives fell 20.61% and 24.45% respectively, and the price difference widened. The company's gross profit margin in 2023 was 25.26%, an improvement of 5.78 pcts year on year.
Adding hot melt adhesives and silicon-carbon anodes further opened up the company's growth space 2024.02.20. The company acquired Jiahao shares, an enterprise in the hot melt pressure-sensitive adhesive industry, which helps the company optimize and integrate resources, forms complementary advantages, and helps further improve the company's industrial layout and expand the company's business area. In addition, SiBao New Energy's 50,000 tons/year silicon-carbon anode material and special adhesive project for lithium batteries has been successfully implemented. In 2023, the company built a pilot production line for 1000 tons/year silicon-carbon anode materials and was successfully put into operation. The products were tested by 19 power battery manufacturers, cylindrical battery customers, and 7 3C battery factory customers. They have achieved order breakthroughs and have been well received by customers. Currently, batch delivery is being carried out according to customer needs. The expansion of the hot melt adhesive business and the smooth introduction of silicon-carbon anodes to downstream customers will open up room for the company's growth in the field of hot melt adhesives and new energy sources.
Investment advice
As one of the major companies in the silicone sealant industry, the company's performance is expected to usher in steady growth as downstream demand continues to recover. Considering the recent macroeconomic operating environment, we expect the company's net profit to be 377, 451, and 558 million yuan respectively in 2024-2026, with year-on-year growth rates of 19.5%, 19.8%, and 23.6%, respectively. The 2024-2025 results will be reduced by 13.93% and 20.88%, respectively, from the previous value. The corresponding PE is 15, 12, and 10 times, respectively. Maintain a “buy” rating.
Risk warning
(1) Risks caused by price fluctuations of raw materials and major products; (2) production safety risks;
(3) Environmental protection risks;
(4) The project's commissioning schedule fell short of expectations.