Incident: The company announced its 2023 performance forecast. In 23, the company expects to achieve net profit of 780 to 880 million yuan, a year-on-year change of -75.3% to -72.1%, and is expected to achieve net profit deducted from non-mother of 822 to 922 million yuan, and a year-on-year change of -73.1% to -69.8%. Among them, in Q4, Q4 is expected to achieve net profit of 273-373 million yuan, a year-on-year change of +594.6% to +848.8%, a month-on-month change of -12.6% to +19.4%, and a year-on-year increase of 2.72 to 372 million yuan, and a year-on-year change of -29.2% to -2.8%.
Downstream demand for the company's chemical products was poor in '23, and falling product prices put pressure on performance. In '23, due to factors such as fluctuations in petroleum prices and increased competition in the chemical product market, the downstream demand for the company's chemical products was poor. The year-on-year decline in the prices of some products was greater than the decline in the price of corresponding raw materials. Combined with safety incidents at the company's subsidiaries, affecting the overall operating load of the park, the company's performance was under pressure. In Q3 and Q4 in '23, although the chemical product market picked up and prices of some major chemical products rebounded and fluctuated, product prices fell significantly year on year, and the company's operating performance declined further year on year. In terms of main product prices, according to Baichuan Yingfu data, the average market prices of n-butanol, octanol, polycarbonate, caprolactam, PA6, and dimethylformamide were 0.80, 1.06, 1.58, 1.26, 1.38, and 0.53 million yuan/ton, respectively, with year-on-year changes of -7.0%, +0.7%, -19.0%, -4.2%, -5.8%, and -54.9%, respectively. As demand for the company's product terminals gradually picks up, performance is expected to improve, and we are waiting for the economy to recover.
Continue to promote the construction of additional production capacity and strengthen the advantages of integrated industries. The company comprehensively promotes various chain extension, chain repair and strengthening projects. The products have a high degree of diversification and the core products have advantages in scale. The company will give full play to the “integration, intensity, parkization and intelligence” advantages of the park, further improve the chemical industry and chemical engineering industry planning, accelerate industrial upgrading and layout optimization, and promote ongoing renewal projects and technical improvement projects in an integrated manner. As of September 25, 23, the company's bisphenol A phase I project and methylamine/DMF project have been completed and put into operation. As of March 18, '24, production capacity construction for the company's other projects, such as caprolactam, nylon, and 400,000 tons of silicone, is still being carried out in an orderly manner.
The company will use the strong background and resources of Sinochem to build a first-class new chemical materials industrial park. The controlling shareholder of the company is Sinochem Investment. Sinochem, which belongs to Sinochem Investment, is an important state-owned enterprise supervised by the State Council's State-owned Assets Administration Commission. Sinochem is the world's largest comprehensive chemical company, with 16 domestic and foreign listed companies.
Sinochem has strong market competitiveness and operational strength. Sinochem set up an engineering technology innovation center in the company and provided a credit line for the company through Sinochem Finance Corporation. In the future, it will continue to provide comprehensive support to the company through technical support, management improvement and industrial collaboration to help extend the company's industrial chain and build a first-class new chemical materials industrial park. At the same time, the company will continue to use the strong background and resources of Sinochem to enhance its core competitiveness.
Profit forecast, valuation and rating: Due to falling prices of the company's main products, we lowered the company's profit forecast for 23-25. The company's net profit for 23-25 is estimated to be 8.46 (down 66.2%) /14.26 (53.0%) /18.95 billion yuan (down 47.8%), respectively. The company continues to expand its production capacity layout in the field of new materials. The future can be expected, and we maintain the company's “buy” rating.
Risk warning: raw material and product prices fluctuate, capacity construction risks, downstream demand falls short of expectations.