Event: The company released its earnings forecast for the first quarter of 2024. The estimated 24Q1 revenue is 650 to 720 million yuan, +28.60% to 42.45%; net profit to mother is 0.94 to 115 million yuan, +63.65% to 100.20% year over year; net profit after deducted from mother is 0.91 to 112 million yuan, +79.04% to 120.36% year over year.

Demand was weak in 23Q4 and earnings were under pressure, and 24Q1 improved month-on-month. 23Q4 achieved revenue of 549 million yuan, -9%/+3% month-on-month, achieved net profit of 53 million yuan, -21%/-26%, and realized deducted non-net profit of 34 million yuan, and -40%/-35% month-on-month. Mainly due to weak downstream demand, the company's long-chain binary acid sales volume and unit price were all affected. Downstream demand recovered in 24Q1, and both revenue and net profit improved month-on-month.

The 900,000-ton bio-based polyamide project in Shanxi is scheduled to complete part of its production capacity by the end of '24. On March 14, '24, the company announced that it would extend the scheduled usage period for the “Project with an annual output of 500,000 tons of bio-based pentanediamine and 900,000 tons of bio-based polyamide” from the end of '24 to the end of '25, and part of the production capacity will be built first by the end of '24. The delay in the project is mainly due to the fact that the supporting infrastructure in the park where the project is located needs to be completed and put into operation one after another. At the same time, considering that there is a certain process of releasing polyamide customer demand, batch production has higher operating efficiency.

In terms of bio-based polyamide applications, the company has made important progress in the field of spinning and engineering plastics. It has established batch supply cooperation with a number of major customers in the industry. At the same time, it has developed diverse bio-based polyamide thermoplastic continuous fiber composites for more downstream fields such as lithium power, photovoltaics, wind power, transportation, etc., and is actively promoting sample delivery testing with major target customers in various fields.

The fixed increase project is progressing gradually. In '23, the company issued a fixed increase plan, introduced the China Merchants Group, and signed a “Business Cooperation Agreement” with China Merchants Group, agreeing that the sales volume of bio-based polyamide purchased by China Merchants in 23/24/25 will not be less than 1/8/200,000 tons. The fixed increase is still ongoing. At the end of January '24, it issued a response report to the review inquiry letter. Sales of bio-based polyamide are expected to open up after the scheduled expansion site.

Investment advice: The fixed increase project fell short of expectations. Waiting for the release of bio-based polyamides, we lowered the company's net profit from 23-25 to 3.62/5.21/666 million yuan, corresponding to the current PE of 63.9/44.3/34.7x, maintaining the “increase” rating.

Risk warning: Project commissioning falls short of expectations, raw material costs fluctuate, demand falls short of expectations, exchange rate fluctuations