Description of the event
In 2023, the company achieved revenue of 12.04 billion yuan (+9.6% YoY), realized attributable net profit of 1.41 billion yuan (-47.0% YoY), and realized attributable deducted non-net profit of 2.41 billion yuan (-9.4% YoY). Among them, Q4 achieved revenue of 4.01 billion yuan in a single quarter (+52.2% YoY, +49.3%), realized net profit of -100 million yuan (-130.5% YoY, -121.1% YoY), and realized non-net profit of 800 million yuan (+157.1% YoY, +93.4% YoY). With 2024Q1, the company achieved revenue of 3.28 billion yuan (+31.0% YoY), realized net profit of 570 million yuan (-12.7% YoY), and realized non-net profit of 570 million yuan (-13.0% YoY). A cash bonus of $3.0 (tax included) is distributed for every 10 shares.
Incident comments
Prices of the company's products declined slightly in 2023, and the increase in arabine hedged some of the effects. In 2023, the company's main products, soda, and urea, were affected by the supply-demand relationship and the decline in coal prices on the cost side. Prices declined slightly, and investment income of participating coal companies declined; according to Baichuan Yingfu, the average prices of domestic light soda ash, heavy soda ash, baking soda, urea, and thermal coal (Qindao 5,500 kcal) in 2023 were 2608, 2804, 2060, 2455, 981 yuan/ton, respectively, compared with the average price of -4.3%, -2.1%, -15.9%, -9.2%, and -21.2% since 2022; Produces soda ash, baking soda, and urea Gross margins were 59.6%, 43.1%, and 24.6%, respectively, +1.9 pct, -9.5 pct, and -5.0 pct year-on-year, respectively. Some production lines of the company's Yingen Mining Natural Alkali Phase I project were put into operation in mid-year. Production capacity was gradually released, and sales increased. In 2023, the company's alkali industry achieved sales volume of 3.767 million tons, a year-on-year increase of 36.2%, and urea sales volume of 1.81 million tons, an increase of 15.8% year-on-year. The increase in sales hedged some price impacts.
In addition, the company accrued an estimated debt of 960 million yuan in the Mengda mining prospecting rights transfer lawsuit, which had a significant impact on non-recurring profit and loss in 2023.
Product prices continued to fall in 2024, and the third and fourth production lines of arabine continued to advance. According to Baichuan Yingfu, the average price of 2024Q1 domestic light soda ash, heavy soda ash, baking soda, urea, and thermal coal (Qindao 5,500 kcal) was 2242, 2361, 1858, 2206, and 914 yuan/ton, which were -15.2%, -15.8%, -14.6%, -8.7%, and -5.2% month-on-month in 2023Q4, respectively. According to investor questions disclosed by the company, the third line production line of Yingen Mining has basically reached production, and the fourth production line is being put into operation. It is expected that with the gradual release of production line capacity, the company's efficiency will improve significantly.
The dividend reached a record high, and the dividend rate was impressive. According to the “Notice on the Company's 2023 Profit Distribution Plan”, the company plans to distribute 3 yuan (tax included) to all shareholders in 2023, with a total proposed cash dividend of 1.12 billion yuan, accounting for about 46.4% of non-attributable net profit. The total dividend amount reached a record high since listing. With a closing market value of 23.36 billion yuan on April 15, 2024, the dividend rate reached 4.8%. Considering that the company has high-quality alkali ore resources, the process cost advantage is obvious. The alkali industry is expected to build up the company's strong bottom profit, and the second phase of Yingen Mining's investment amount is about 5.5 billion yuan. The scale is small, and the construction of public projects has been completed, and the capital expenditure is far less than the first phase. Considering the gradual release of arabine, the company's cash flow is expected to continue to improve, and long-term high dividends may be maintained.
Maintain a “buy” rating. The company is a leading domestic soda ash and baking soda enterprise. It uses the natural alkali method to prepare soda ash. It has the advantages of cost, energy efficiency and environmental protection. The process relies on natural alkali ore resources, and resource barriers are difficult to replicate. Some production lines in the first phase of Yingen Mining are in the process of climbing. The second phase of the 2.8 million tons/year soda ash and 400,000 tons/year baking soda project is expected to be completed in December 2025, with excellent growth. Without considering the negative impact of the Mengda Mining prospecting rights transfer lawsuit on the company's finances, net profit attributable to 24-26 is estimated to be 26.8, 32.4, and 4.05 billion yuan, maintaining a “buy” rating.
Risk warning
1. Product prices have declined sharply;
2. Judgments in litigation cases adversely affect the company.