The company released its 2023 annual report, with a year-on-year decline of 48.5%. The company's EVA particle sales continued to grow. It is expected to benefit from the bottom of EVA particle prices in the future and maintaining an increase in holdings.
Key points to support ratings
The company's performance in 2023 decreased by 48.5% year on year: the company released its 2023 annual report and achieved full year operating income of 6.778 billion yuan, a year-on-year decrease of 16.91%; net profit to mother was 446 million yuan, a decrease of 48.5% year on year; after deducting non-net profit of 181 million yuan, a decrease of 74.4% year on year. According to the company's performance calculation, 2023Q4 achieved net profit of 42 million yuan, a year-on-year decrease of 52.8% and a decrease of 46.73% month-on-month; net profit without return to mother of 55 million yuan, a year-on-year decrease of 2.53% and a decrease of 1.63% month-on-month.
Sales of EVA particles continue to grow, and profits are under pressure: Benefiting from the rapid growth in demand in the photovoltaic industry, the company's EVA particle sales have steadily increased. In 2023, the company's sales volume of EVA particles reached 160,200 tons, a year-on-year increase of 13%. Affected by fluctuations in EVA particle prices, the company's revenue and profit for EVA particles declined in 2023. According to the annual report, EVA particles achieved annual revenue of 2,024 billion yuan, a year-on-year decrease of 28.62%, and a gross profit margin of 40.95%, a year-on-year decrease of 10.10 percentage points. In the future, with the steady rise in EVA prices, the company's profits are expected to recover.
Integrated advantages enhance the company's EVA particle cost advantage: the company currently has an EVA particle production capacity of 150,000 tons/year, a production capacity under construction of 200,000 tons/year, and the new production capacity is scheduled to be put into operation in 2025. The company's 90,000 tons/year VA unit was successfully put into operation in January 2024. It has now achieved continuous and stable operation at full load, which can guarantee the stable supply of VA raw materials for the company's EVA device and strengthen the company's EVA cost advantage. While maintaining the competitive advantage of EVA products, the company actively lays out the POE business and plans to build a 300,000 tons/year POE project. The first phase of the 100,000 tons/year POE project is expected to be completed and put into operation in 2025.
The new business is progressing steadily: The company has deployed new energy lithium battery series materials such as UHMWPE, lithium carbonate solvents, lithium battery additives, etc. The 20,000 tons/year UHMWPE plant was handed over in January 2024, and the 4,000 tons/year VC unit for the lithium battery additive project is scheduled to be completed and put into operation in 2024. In terms of biomaterials, the company's 100,000 tons/year lactic acid plant and 40,000 tons/year PLA plant are all scheduled to be completed and put into operation in the first half of 2024. The introduction of new product production capacity will further enhance the company's competitiveness.
valuations
Based on current EVA particle price trends, the company's subsequent production capacity investment plan, and raw material cost advantages, we adjusted the company's 2024-2026 forecast earnings per share to 0.51/0.57/0.65 yuan (the original 2024-2026 forecast was 0.78/0.79/-yuan), corresponding to a price-earnings ratio of 32.3/29.0/25.1 times; the company has a cost advantage with VA self-supply, and is expected to become a platform-based new materials company, maintaining an increase rating.
The main risks faced by ratings
The industry's production capacity release exceeded expectations; product price competition exceeded expectations; downstream demand fell short of expectations; raw material and fuel power prices fluctuated; and photovoltaic policy risks.