Jiahua Energy released its 2023 annual report. In 2023, the company achieved operating income of 8.774 billion yuan, a year-on-year decrease of 23.72%, and net profit to mother of 1,180 billion yuan, a year-on-year decrease of 26.21%.
The decline in the company's revenue and profit in 2023 was mainly due to a decrease in sales volume and sales prices of major products. 1) In terms of operating income by product, fatty alcohol (acid), polyvinyl chloride, steam, chlor-alkali, sulfonated pharmaceutical products, sulfuric acid (total acid content), photovoltaic power generation, handling and related revenue in 2023 changed by -34.48%, -23.92%, -14.58%, -29.04%, -33.32%, -51.28%, 11.77%, and 53.58% to 25.41, 17.27, 18.57, 10.11, 4.49, 1.19, 1.55, and 162 million yuan. 2) By product gross margin, fatty alcohol (acid), polyvinyl chloride, steam, chlor-alkali, sulfonated pharmaceutical series products, sulfuric acid (total acid content), photovoltaic power generation, handling and related gross margins in 2023 changed by 4.91, -13.54, 1.18, -6.71, -7.01, -9.62, 6.15, and -19.13 percentage points to 18.95%, 0.45%, 25.51%, 46.82%, 5.24%, 0.80%, 52.35%, and 66.64%, respectively. 3) Sales, management (including R&D), and financial expense ratios changed by 0.05, 0.60, and -0.95 percentage points to 0.15%, 5.39%, and 0.09%, respectively. In total, the three cost rate changes were -0.30 percentage points to 5.63%.
The company promotes the construction of key projects such as PVC Phase II and Fatty Alcohol Phase II. 1) The 300,000 tons/year vinyl chloride (VCM) phase II project and the 300,000 tons/polyvinyl chloride (PVC) phase II project have an estimated investment amount of 2 billion yuan. Due to insufficient downstream demand for polymer materials, the overall progress of the project is slow; 2) Build a new 150,000 tons/year multi-variety fatty alcohol project, with an estimated investment amount of 600 million yuan. Currently, the project is still in progress.
The company continues to promote the development of hydrogen energy and photovoltaic business, and actively lays out the future direction of industrial development. 1) The company carries out research and development in the direction of hydrogen energy equipment. The company strengthens industry-university-research cooperation with universities, research institutes, etc., develops electrolyzer equipment, and lays out test devices for the industrial application of electrolyzers at Jiahua Hydrogen Storage Company to provide a testing platform for product technology improvement, and become a standardized testing base for regional electrolyzer related products. 2) Jiahua Hydrogen Storage, a wholly-owned subsidiary of the company, has begun construction of a hydrogen storage equipment project with an investment of 400 million yuan. The project will target new energy fields such as green hydrogen electrolyzer equipment manufacturing and energy storage to promote the company's business development in the hydrogen energy industry.
Profit forecasts and reference ratings. We expect the company's EPS in 2024-2026 to be 0.90, 0.97, and 1.03 yuan respectively. Referring to the valuation of comparable companies in the same industry, we believe that a reasonable valuation range is 10-12 times PE in 2024, and the corresponding reasonable value range is 9.00-10.80 yuan, which remains superior to the market rating.
Risk warning. The progress of production capacity under construction fell short of expectations. Prices of products such as fatty alcohols and sulfonated pharmaceuticals fluctuated greatly, prices of raw materials fluctuated, and the macroeconomic economy declined.