Key points of investment:
Company announcement: The company released its 2023 annual report. In 2023, the company achieved operating income of 9.120 billion yuan (YoY -4.98%), net profit of 789 million yuan (YoY +12.23%), net profit of 736 million yuan (YoY +14.64%); of these, 2023Q4 achieved operating income of 2,427 billion yuan (YoY -3.76%, QoQ +4.36%), net profit to mother of 308 million yuan (YoY +36.25%, QoQ +82.36%), net profit not to mother Profit of 296 million yuan (YoY +47.09%, QoQ +84.91%), and the results were in line with expectations.
At the same time, the company plans to distribute a cash dividend of 4.00 yuan (tax included) to all shareholders for every 10 shares, for a total cash dividend of 339 million yuan, with a cash dividend ratio of 42.90%.
Production and sales of the main products such as phenolic resins grew steadily, and Q4 profit margins increased significantly. According to the company's announcement, the sales volume of the main products in 2023 was 48.92, 15.77, and 681 million tons, respectively, +26.28%, +9.48%, and +12.20% year-on-year, respectively. The average prices of phenolic resins, foundry resins, and electronic chemicals were 7201, 10136, and 17,380 yuan/ton, respectively, -20.00%, -28.93%, and -16.86% year-on-year; of which 2023Q4 phenolic resin, foundry resin, and electronic chemicals sold 12.47, respectively. 4.20, 17,500 tons, +11.85%, +3.77%, -0.24%, -6.95%, +8.66%, and -17.26% month-on-month respectively; the average prices of phenolic resins, foundry resins, and electronic chemicals were 7812, 10280, and 18193 yuan/ton, respectively, -6.48%, -17.25%, -8.78%, and +17.16% month-on-month respectively. On the cost side, the average purchase price of the main raw materials in 2023 was 6962, 6882, 2086, 13246, and 7141 yuan/ton, respectively, -22.62%, -37.55%, -11.96%, -8.93%, and -43.07% of the main raw materials. In terms of profit margin, 2023Q4 had a gross sales margin of 25.14% (YOY+2.08pct, QoQ+2.52pct) and a net sales margin of 12.92% (YOY+3.84pct, QoQ+5.55pct), and profit margin increased significantly.
Biomass chemicals are gradually achieving production results, and electronic resin PPO is about to pass certification and release. According to the company's announcement, the “1 million tons/year biomass refining integration (phase 1 project) project” at the Daqing production base has completed installation, commissioning and early trial production of production processes, machinery and equipment, and was officially put into operation in May 2023. It has successfully achieved a leap forward in upgrading from “process” to “industry” and fundamentally reshaped the pattern of comprehensive utilization of agricultural straw. Based on independent research and development, the company provides one-stop solutions for the entire electronic chemical industry. Various high-end electronic chemicals, such as special electronic resins, phenol biphenyl epoxy, crystalline epoxy, DCPD epoxy, maleimide resin, hydrocarbon resin, PHS resin for KrF photoresist, etc., have successfully developed and achieved mass production, and launched 1000 tons/year maleimide resin projects and 2000 tons/year hydrocarbon resin projects. In 2023, M6/M7/M8 grade 5G special electronic resin (polyphenylene ether PPE/PPO/MPPO) was certified by domestic and foreign end customers and industry chains. The current product supply is in short supply, and production expansion plans are progressing in an orderly manner. The PPO project with an annual output of 1000 tons will be put into operation in the 2nd quarter of 2024. At that time, PPO will become one of the main products in the company's electronic chemicals industry. The company not only focuses on developing M6 and M7 level high-frequency high-speed resins, but is also gradually promoting the development and promotion of ultra-low loss materials such as M8 and M9. The continuous release of electronic chemicals is expected to become a new profit growth point for the company.
Investment analysis: Maintain the company's 2024-2025 net profit of 1,035 billion yuan and 1,225 million yuan respectively, adding the 2026 profit forecast. The company's net profit to the mother is estimated to be 1,471 billion yuan in 2026. The current market value corresponds to PE 16, 13, and 11 times, respectively, to maintain the “increase” rating.
Risk warning: Prices of raw materials have risen sharply, product prices have dropped sharply, the growth rate of the downstream casting industry has slowed down, production of biomass projects has fallen short of expectations, the industrialization of sodium-ion batteries has fallen short of expectations, and the growth rate of the AI server market has fallen short of expectations.