The chemical product boom declined, and revenue and net profit to mother declined year-on-year in 2023. In 2023, the company achieved operating income of 6.78 billion yuan (-16.9% YoY), achieving net profit of 450 million yuan (YoY -48.5%); of these, it achieved operating income of 1.84 billion yuan (+5.8% YoY, +6.5% YoY) and net profit to mother of 0.4 billion yuan (-52.8% YoY, -45.7% YoY) in the fourth quarter. The company's gross margin in 2023 was 16.2% (-4.1pcts year on year), mainly due to the decline in the company's chemical product boom and profitability. The company's three-year rate in 2023 was 7.8% (+0.8 pcts year over year), the R&D expenses rate was 4.6% (+0.5pcts year over year), and the net margin was 6.7% (-3.9 pcts year over year).
EVA's gross margin has declined due to volume compensation, and the boom in chemical products such as polypropylene, propylene oxide, derivatives, and methanol is low. By sector, EVA sales in 2023 were 160,000 tons (+12.7% YoY), revenue was 2.03 billion yuan (YoY -28.6%), average price was 12,635 yuan/ton (YoY -36.6%), gross margin was 41.0% (YoY -10.1pcts); the company's polypropylene (PP) focused on high-value-added high-end specialty materials, with revenue of 1.70 billion yuan (-14.5% YoY), gross margin of 4.5% (YoY +5.0pcts); Ethylene oxide and derivatives (EOD) revenue EOD 11.5 100 million yuan (-3.9%), gross margin was 10.2% (-0.4pcts year on year), surfactant product sales increased 31.1% year on year. Among them, the agrochemical sector increased 40.5% year on year, the emulsion sector increased 93.0% year on year, and export business increased 72.6% year on year.
A number of new material projects are progressing steadily, and the new materials industry chain is gradually improving. In terms of photovoltaic materials, the 90,000 tons/year vinyl acetate (VA) installation was successfully operated once in January 2024, and has now been continuously operated at full load to achieve full self-supply of raw materials; the EVA production capacity is 200,000 tons/year, which is planned to be put into operation in 2025; it is planned to build a 300,000 tons/year POE project. The first phase of the 100,000 tons/year plant is expected to be put into operation in 2025. In the future, the company will have both EVA and POE core photovoltaic film products. In terms of new energy battery materials, the company's 20,000 tons/year ultra-high molecular weight polyethylene (UHMWPE) plant and 4,000 tons/year lithium battery additive project plant will be completed and put into operation in 2024. In the field of biomaterials, the 100,000 tons/year lactic acid plant and the 40,000 tons/year polylactic acid plant are scheduled to be completed and put into operation in the first half of 2024; the 50,000 tons/year PPC plant is scheduled to be completed and put into operation in 2025. In terms of electronic materials, the 10,000 tons/year electronic special gas project is scheduled to be put into operation in the first half of 2024, and investment in ultra-high purity electronic special gas and wet electronic chemicals will continue to increase in the future.
Risk warning: macroeconomic systemic risks, risk that the commissioning progress of new projects falls short of expectations, market risks such as falling product prices exceeding expectations, and increased competition for new entrants.
Investment advice: Due to the weak recovery in downstream demand for traditional downstream EVA, polypropylene, propane oxide, etc., the product price spread narrowed. The 2024-2025 period was lowered and the 2026 net profit to mother was 5.5/6.7/888 billion yuan (original value was 88/1.10 billion yuan), +22.6%/+30.6% year over year, EPS was 0.41/0.50/0.66 yuan. The corresponding PE was 43.3/35.3/27.0 times, maintaining the “increase” rating.