Net profit returned to mother in '23 of 60 million yuan, maintaining the “increase in holdings” rating
Chenhua Co., Ltd. released its annual report on April 17. In 2023, it achieved revenue of 900 million yuan (yoy -14%), net profit to mother of 60 million yuan (yoy -49%), and deducted non-net profit of 0.3 billion yuan (yoy -69%). Among them, Q4 achieved revenue of 210 million yuan (yoy -11%, qoq -17%) and net profit to mother of 0.2 billion yuan (yoy +664%, qoq +31%). 24Q1 achieved revenue of 230 million yuan (yoy -4%) and net profit of 0.2 billion yuan (yoy +46%) to mother. We expect the company's 24-26 net profit to be 0.70/0.80/0.92 billion yuan, corresponding to EPS of 0.33/0.38/0.43 yuan. Combined with the company's 24-year Wind's consistent average valuation of 24xPE, considering the company's technical advantages in the industry and actively exploring domestic and foreign markets, we will give the company a 24-year 29xPE with a target price of 9.57 yuan to maintain a “gain” rating.
The price and price spread of polyether amine have narrowed, driving down the company's revenue and gross margin to the low price of polyether amine in 23. According to Baichuan Yingfu, the average price of D230 in the East China market was -39% to 19,000 yuan/ton in 23, and the average price of raw propylene oxide in the East China market was -7% YoY to 0.96 million yuan/ton. The price difference continued to narrow. The revenue of the company's surfactants sector was -10% to 740 million yuan YoY in '23, and gross margin yoy-9.7pct to 17%. The flame retardant business achieved revenue of -28% year-on-year to 110 million yuan, and gross margin yoy+2.2pct to 12%. The silicone rubber business achieved revenue of -27% year-on-year to 70 million yuan, and gross margin yoy+5.9pct to 21%. In '23, the subsidiary Huai'an Chenhua achieved net profit of -03 billion yuan. The company's comprehensive gross margin was 6.4 pct to 17% year on year, and the period expense ratio was +1.3 pct to 14.4% year over year.
The average price of polyether amine declined month-on-month, and the gross margin was +2.9/+1.9pct to 19.8% month-on-month. According to Baichuan Yingfu, the average price of D230 in the 24Q1 East China market was -16% to 15,000 yuan/ton, and the average price of raw propylene oxide in the East China market was -2% month-on-month to 0.92 million yuan/ton, and the price difference continued to narrow. Demand in the flame retardant and silicone rubber industries is also weak, which has had an impact on performance. The 24Q1 company's gross margin was +2.9/+1.9pct to 19.8%, and the period expense ratio was +0.2/-2.5pct YoY to 13.6%.
The polyether amine boom is still waiting to improve. According to Baichuan Yingfu, the price price of polyether amine D230 in East China was 13,500 yuan/ton, down 12% from the average price of 24Q1. The price difference between polyether amine, propylene oxide, and propylene glycol fell 20,000 yuan/ton from the 24Q1 average to 10,400 yuan/ton. Although the polyether amine price difference is still low since 2020. The polyetheramine product boom is expected to improve as demand in the wind power sector picks up. In addition, according to the company's earlier announcement, the company plans to increase capital by 200 million yuan to its wholly-owned subsidiary Huai'an Chenhua's “40,000 tons of polyether amine (42,000 tons of polyether) project”, which is expected to contribute more to the company in the future.
Risk warning: There is a risk that downstream demand will continue to be sluggish, and the progress of new projects will not meet expectations.