In 2023, the company's revenue fell 27.90% to 15.303 billion yuan, net profit to mother fell 48.92% to 1,534 billion yuan, and net profit after deducting non-return to mother decreased by 41.13% to 1,629 billion yuan. Among them, the company achieved operating income of 4.473 billion yuan in the fourth quarter, down 42.68% year on year and 23.88% month on month; net profit to mother was 634 million yuan, down 50.37% year on year, up 491.66% month on month; net profit after deducting non-return to mother was 513 million yuan, down 53.48% year on year, up 68.90% month on month. In 2023, the company plans to distribute 2.5 yuan in cash dividends to all shareholders for every 10 shares. The dye industry needs to pick up. We are optimistic about the increase brought about by the release of the company's various chemical production capacity and the promotion of the real estate business, and maintain the purchase rating.
Key points to support ratings
Downstream demand is sluggish, and falling prices of dyes and intermediates are dragging down revenue and gross profit. The dye business and intermediates business are the main sources of the company's profits. Dyes: In 2023, the company's dye business achieved revenue of 7.521 billion yuan, a year-on-year decrease of 13.28%; sales volume of 222,500 tons, a year-on-year decrease of 2.03%; and an average price of 33,800 yuan/ton, a year-on-year decrease of 11.49%. According to data from the National Bureau of Statistics, the printing and dyeing cloth production of enterprises above the size of China's printing and dyeing industry increased by 1.30% year-on-year in 2023. The dye industry is expected to pick up in the future as the country grows steadily and promotional fee policies become effective. The gross margin of the company's dye business fell 4.07pct to 27.84% year on year. Currently, price competition in the dye industry is still fierce, and the profitability of the industry is low. However, the company has achieved cost reduction and efficiency through measures such as personnel streamlining, organizational optimization, process optimization, digital transformation, and product complexity removal, and the cost advantage is prominent. Intermediates: Relying on the advantages of the industrial chain, the company expanded production of related intermediates such as resorcinol, paraphenylenediamine and 3-aminophenol with industrial chain integration as the core, and expanded production capacity and market share. The intermediate business achieved operating income of 3.138 billion yuan, a year-on-year decrease of 21.04%; sales volume of 911,000 tons, up 3.66% year on year; average price of 34,400 yuan/ton, down 23.83% year on year; gross profit margin was 32.01%, down 14.55 pcts year on year.
The company has maintained a leading position in the intermediates industry, and this business is expected to bring more growth to the company in the future. Real estate business:
The company focuses on deep regional cultivation and continues to enhance the commercial image of high-quality projects. In 2023, the company achieved revenue of 1,326 billion yuan, a year-on-year decrease of 70.52%. It is mainly due to sales achieved by last year's projects, and revenue was centrally confirmed. The gross margin was 30.29%, up 6.07 pct from the previous year.
Profitability is under pressure, and cash flow is sufficient. In 2023, the company's consolidated gross margin decreased by 3.98 pct year-on-year to 26.13%.
The scale effect of the decline in revenue has not been fully unleashed. The company's sales/management/R&D/finance expense ratios in 2023 were 3.92%/5.12%/3.79%/-0.66%, respectively, +0.73pct/+1.04pct/+0.45pct/-1.02pct, respectively. Among them, the year-on-year decrease in financial expenses was mainly due to the company's interest income and exchange gains and losses. The company's cash flow from operating activities for the year was 2,751 billion yuan, an increase of 187.79% over the previous year, and the cash flow remained healthy.
Chemical production capacity under construction has been released steadily, and the real estate business continues to advance. According to the 2023 annual report, the company currently has a production capacity of 300,000 tons/year for dye projects, 100,000 tons/year for additives projects, 119,500 tons/year for intermediate projects, and 1.45 million tons/year for inorganic product projects. Among them, the dye project's production capacity includes an anthraquinone dye project with an annual output of 9,000 tons; the production capacity of the intermediate project includes an H acid project with an annual output of 20,000 tons and an annual output of 9,000 tons of m-aminophenol. The first phase of H acid has been tested for production of 5,000 tons, and the first phase of the m-aminophenol project has already been put into operation. In terms of real estate business, the Shanghai Huaxing New Town Project has completed pouring and construction of a large base slab for the 320-meter main tower office building to the first floor, and completed the 150-meter super-high-rise residential project schedule. Furthermore, the opening of the Wanshang Exhibition Hall started collecting customers, and the name of the case “Bomao Plaza” was released to the public. The company's various businesses are progressing in an orderly manner, and the quality of development is expected to be further improved.
valuations
Due to weak demand in the dye industry, profit forecasts are adjusted. EPS is expected to be 0.59 yuan, 0.76 yuan, and 0.87 yuan respectively in 2024-2026, corresponding to PE 15.2 times, 11.8 times, and 10.3 times, respectively. The dye industry needs to pick up. We are optimistic about the increase brought about by the release of the company's various chemical production capacity and the promotion of the real estate business, and maintain the purchase rating.
The main risks faced by ratings
Prices of raw materials fluctuated greatly; downstream demand continued to be sluggish; and the real estate business fell short of expectations.