Core views
The sharp increase in the company's Q4 performance was mainly due to a recovery in the price difference of phenolic resins in the main business and improvements on the cost side. Looking ahead to the phenolic resin sector, the company, as the industry leader, has suspended production expansion. After 2 years of integration, the industry is expected to usher in a restoration period. The phenolic resin price spread widened year-on-year in 24. At the same time, the Zhuhai epoxy project has also begun to expand, and the main business is expected to increase steadily. The company's future flexibility mainly comes from biomass projects and electronic chemicals. The short-term nodes are all in the second quarter of this year. In the long run, the company has added new projects such as kiloton double horses, hydrocarbon resins, and silicon-carbon anode porous carbon, further opening up room for growth.
occurrences
The company released its annual report. In 2023, the company achieved revenue of 9.12 billion yuan, -5.0%; net profit to mother of 789 million yuan, +12.2% year over year; of which Q4 revenue was 2.43 billion yuan, -53.8% year on year, +4.3% month on month; Q4 net profit to mother was 308 million yuan, +36.3% year over month.
Brief review
The company released an annual report, and Q4 performance improved markedly
The Q4 gross profit margin was 25.1%, +2.1pct year over year, and +5.6pct month-on-month, achieving significant growth.
The main reason for the improvement in Q4 gross margin was the recovery in the price spread of phenolic resin. In 23Q4, the price spread surged 488 yuan/ton from month to month. In addition, government subsidies on the cost side increased by 18.27 million yuan year on year in '23, and VAT deductions increased by 27.82 million yuan year on year. These cost side changes are also one of the reasons for the sharp increase in Q4 profits. According to the announcement, the VAT credit policy will be implemented for 23-27 years, and future companies are expected to continue to benefit.
The main business has been rising steadily for 24 years, and the Zhuhai epoxy resin project has continued to release the phenolic resin sector. As an industry leader, the company has suspended production expansion, and the industry is expected to usher in a restoration period after 2 years of integration. The 24-year phenolic resin price difference was +125 yuan/ton over the same period last year, and it is expected that the main business phenolic resin will increase steadily. The 5,000-ton special epoxy production expansion project in Zhuhai was put into trial production in '23, and is expected to start rolling out this year.
The straw project has huge space, and the operating rate is gradually being optimized
In the context of the country's promotion of the development of the non-food biomass industry, the company's straw project has broad development space: 1) biochar, one of its products, can be extended downstream to sodium electroanode hard carbon, and the company's 10,000 ton production line has been shipped in batches; 2) biochar can be used as bio-based methanol fuel, which is expected to be well used in the shipping industry. Currently, international shipping giants Maersk and Mercedes have actively explored bio-based methanol fuels. The future industry space is over one million tons. As the technical reform of the project progresses, its operating rate is expected to improve within the year, thereby driving the project to turn a loss into a profit.
PPO production is about to begin in the second quarter, and the company is following the trend and the PPO kiloton production expansion project for the 1,000-ton hydrocarbon project is expected to be put into operation in the second quarter. On the demand side, the incident of Nvidia B100 Doosan replacing Taiguang in March disrupted the industrial chain pattern, but 1) M7 and M8 are PPO based systems, and PPO demand is highly deterministic as the industry iterates; 2) the penetration rate of traditional server PCIe 5.0 increases rapidly, driving demand; 3) the domestic replacement logic of the copper clad plate & PPO industry chain is still there, and the company's PPO business development has card advantages.
The company announced in its annual report that it will expand production by 1,000 tons of Shuangma resin and 2,000 tons of hydrocarbon resin, further enriching the company's product lineup of high-frequency and high-speed materials for M6-M9 grade copper clad plates, which is expected to greatly increase the company's performance.
Using the advantages of precursors to expand production of 1000 tons of silicon carbon anodes using porous carbon porous carbon, the silicon solution is a technology with good application prospects for silicon-carbon anodes, and is improved compared to traditional solutions in terms of cycle life and stability. Among them, the preparation of porous carbon is the main difficulty. Phenolic resin and lignin are relatively good preparation materials. As a domestic phenolic resin leader and lignin double giant, the company has rich experience in polymerization, crosslinking and carbonization. This 1000-ton silicon carbon anode porous carbon project has opened up new application fields for the company's products, and has enjoyed huge space as silicon-based anodes and solid-state batteries gradually start up.
Profit forecasting and valuation: The company's main business is rising steadily, and we are optimistic about the huge flexibility brought about by electronic chemical businesses such as PPO and the long-term space for straw projects.
The company's net profit for 2024-2026 is estimated to be 11.05 billion yuan, 15.39 billion yuan, and 1,850 million yuan, respectively. The corresponding PE is 14.5X, 10.4X, and 8.7X, respectively. Considering the improvement in the company's fundamentals and the continued progress of new projects, it maintains a “buy” rating.