Introduction to this report:
Since the first quarter of 2024, the boom in the company's main products such as silicone, glyphosate, and phosphate ore has continued to recover. As glyphosate gradually enters the peak overseas demand season in the second quarter, the company's profit is expected to continue to rise.
Key points of investment:
Maintain an “Overweight” rating. Prices of the company's main products, such as silicone and glyphosate, were gradually restored in the first quarter. Maintaining the 2024-2025 profit forecast, the 2024-2025 EPS is expected to be 1.63 yuan and 2.00 yuan, respectively, and the 2026 EPS forecast is added at 2.24 yuan. Comparatively, the average PE of the company in 2024 was 10.8 times. Based on the extension of the company's industrial chain, the target price corresponding to the 30% valuation premium was raised to 22.90 yuan, corresponding to 14.1 times PE.
The results are in line with market expectations. According to the company's announcement, revenue of 28.105 billion yuan was achieved in 2023, a year-on-year decrease of 7.28%. Net profit attributable to mother was 1,379 million yuan, a year-on-year decrease of 76.44%.
Of this, revenue of 6.178 billion yuan was achieved in the fourth quarter, down 25.73% from the previous quarter. Achieved net profit of 445 million yuan to mother, an increase of 36.85% over the previous month. The gross profit margin for the fourth quarter was 26.89%, a sharp increase of 14.28 pcts over the previous quarter.
Both ends of the industrial chain will continue to be cultivated in 2024. In 2023, the company successfully implemented several new electronic materials and new energy projects. Currently, the company is planning sufficient projects, from upstream phosphate resources to downstream wet phosphoric acid, liquid glue, etc., from domestic industrial chain integration to the layout of overseas pesticide formulation channels. Furthermore, on the cost side, technological reforms are continuing to reduce costs and increase efficiency.
The price of silicone has recovered, and the price of glyphosate has increased. Silicone prices recovered in the first quarter of 2024, while glyphosate prices stopped falling and stabilized. According to Baichuan information, glyphosate stocks declined rapidly in March, while overseas procurement demand gradually began, leading to a bottom rise in prices in early April. We believe that with the gradual increase in purchases in South America in the second and third quarter, further removal of glyphosate stocks will drive the glyphosate boom to a further increase.
Risk warning: Overseas demand for glyphosate is weakening, and project construction progress falls short of expectations