Brief performance review
On March 29, 2024, the company's 2023 annual report achieved revenue of 27.26 billion yuan, a year-on-year decrease of 9.87%; realized net profit to mother of 3,576 billion yuan, a year-on-year decrease of 35.76%. Among them, Q4 achieved revenue of 7.914 billion yuan, a year-on-year increase of 9.36%; realized net profit of 649 million yuan, a year-on-year decrease of 14.09%, after deducting non-return net profit of 800 million yuan, a year-on-year decrease of 14.52%.
Management analysis
The operation of the industry was under slight pressure in the fourth quarter, and additional production capacity in some regions needed to be digested: in the fourth quarter, the company maintained an efficient operation, and products related to new energy materials remained relatively stable, while the production of the Jingzhou base began to contribute significantly to production and sales. The production of chemical fertilizers, acetic acid, and organic amines increased 26%, 97%, and 27% month-on-month, driving the company's product revenue to increase by 13% month-on-month. However, due to the concentrated production capacity of 1 million tons of acetic acid and 300,000 tons of organic amine at the Jingzhou base, it took time for the industry to absorb production capacity. Prices of acetic acid and organic amine showed downward pressure. The average price declined by about 9% and 1% month-on-month, which also led to a certain adjustment in product profits. The company's overall gross margin in the fourth quarter was 17.77%, down about 6.56 points from 24.33% in the third quarter, causing product profits to decline month-on-month.
The operation of the new base project is gradually improving, and there is a basis for further improvement in performance. 2024 is the year the Jingzhou base project was put into operation. Currently, the operation of the Jingzhou base project is basically stable, and some products with a transportation radius have an impact on profits in the short term. It is expected that as the industry's production capacity gradually enters the balance process, the company's profit will gradually return. At this stage, the Jingzhou base only uses urea, acetic acid, and organic amines as the main products. The variety of products is relatively small, and there is limited room for adjustment. On November 10, the company announced that the Jingzhou base had trial production. Judging from the company's minority shareholders' rights in the fourth quarter, the profit of the Jingzhou base in the fourth quarter was about 163 million yuan. Considering that the Jingzhou base did not operate completely and efficiently in the fourth quarter, the Jingzhou base still has room for further costs and profit improvement. The operating advantages of the new base will gradually become apparent.
In the weak operation stage of the industry, the low cost advantage is relatively prominent. The company's newly built Jingzhou base has achieved further process cost optimization compared to the original platform. Along with the further promotion of cost reduction and efficiency at the Dezhou base, the company's profit advantage is expected to expand further.
Profit Forecasts, Valuations, and Ratings
As additional production capacity needs to be digested, demand support is average, and the company's profit forecast for 2024 was lowered by 32%. It is predicted that in 2024-2026, the company will achieve operating income of 326, 379.42 billion yuan, net profit of 45.6, 58.3 billion yuan, and EPS of 2.15, 2.74, and 3.22 yuan. The PE corresponding to the current stock price is 12.18, 9.54, and 8.14, respectively, maintaining the “buy” rating.
Risk warning
Risk of large price fluctuations of raw materials and products; competitive risk brought about by the introduction of new production capacity.