Event: The company released its 2023 annual report. In 2023, the company achieved operating income of 454.5854 million yuan, a year-on-year increase of 15.26%, and realized net profit attributable to shareholders of listed companies of 21.4777 million yuan, a year-on-year decrease of 56.74%.

The decline in the company's performance was mainly due to lower product prices and increased costs. The main reasons for the decline in the company's performance in 2023 are: (1) the sales price of the company's products fell sharply compared to the same period last year, with the parent company's gross operating profit of 739,107 million yuan in 2023, a year-on-year decrease of 11.061 million yuan (-13.02%); (2) the increase in the parent company's total sales expenses, management expenses, R&D expenses, and financial expenses in 2023; (3) The company established a holding subsidiary, Shanghai Nata to invest in the construction of carbon fiber projects and bring in professionals to promote carbon fiber projects The implementation generated operating expenses of 13.357,700 yuan, leading to an increase in management expenses at the merger level.

Set up Shanghai Nata to actively promote the implementation of carbon fiber projects. The company established Shanghai Nata as a joint venture with Shanghai Electric Wind Power Group Co., Ltd. In 2023, the company has scheduled carbon fiber spinning equipment for the carbon fiber project with a long delivery cycle. Other equipment has successively entered procurement processes such as bidding. Guangdong Nata and Gansu Nata have obtained 466.81 acres and 317.56 acres of state-owned construction land use rights, respectively, and have both signed “State-owned Construction Land Use Rights Concession Agreements” with the Jieyang Local Natural Resources Bureau.

The equipment for the fund-raising project and refinancing project has been installed, and we are striving to achieve production as soon as possible. As of March 30, 2024, the equipment for the company's initial fund-raising project and refinancing project has been installed. The company will accelerate commissioning work, strive to achieve production as soon as possible, and expand the company's production scale and production efficiency. On the basis of increasing the scale of products in existing application fields, the product structure of industrial fibers has been further enriched to form the diversified advantages of differentiated polypropylene filament products in multiple fields and coverage, improving the company's market competitiveness and expanding market share.

Profit forecast. Due to falling product prices and increased costs, we expect the company's 2024-2026 EPS to be 0.72 yuan, 0.86 yuan, and 1.27 yuan respectively (the original 2024-25 forecast was 0.97 yuan and 1.74 yuan). Combined with the company's layout in new materials such as carbon fiber, a certain valuation premium will be applied. According to 2024 BPS 10.05 yuan and 2.2 times PB (originally 3.5x PB in 2023), the target price is 22.11 yuan (-35%) to maintain the “superior to the market” investment rating.

Risk warning. The price of raw materials has risen sharply; the progress of projects under construction falls short of expectations; the growth in downstream demand falls short of expectations.