The decline in revenue was due to structural adjustments: the company achieved operating income of 1,884 billion yuan in 23, a year-on-year decrease of 13.2%, and achieved net profit to mother of 325 million yuan, a year-on-year decline of 31.9%. The main reason for the decline in the company's revenue was the withdrawal of the large variety (water reducing agent monomer) business, and the sector's revenue decreased from 330 million yuan in '22 to 57.6 million in '23. At the same time, sales of small-variety products increased by 10% year-on-year, but due to price declines, the revenue of the small-variety sector remained basically the same as year on year.

The month-on-month growth trend is evident: the company's deducted non-net profit for the single quarter of 2023 increased quarterly from 59 million yuan in Q1 to 88 million yuan in Q4. Moreover, the quarterly increase in revenue and profit is mainly driven by sales growth in small product categories. If we consider the impact on production and logistics of surrounding chemical companies during the Hangzhou Asian Games, the company's 23Q4 performance may be better. In a situation where the macro environment has not improved significantly, the company proved its strong competitive advantage in the industry with actual performance.

It is expected to enter a new stage of growth: we believe that in the context of the gradual recovery of the industry due to lower overseas energy costs, and domestic promotion of the development of new types of productivity. The company's innovation-driven fine chemical enterprises, which are oriented to meet the actual needs of customers, are expected to achieve excessive growth. The company is expected to enter a new stage of growth as the third plant (Kaimeiker project) enters the construction and commissioning period.

Based on the recent market and the actual situation of the company, we adjusted the product sales volume, profit level and period rate, etc., and predicted that the company's 2024-2025 EPS forecast would be 0.70 and 0.89 yuan (the original forecast was 0.81 and 1.02 yuan), and added the 2026 forecast of 1.07 yuan. The 2024 valuation of the comparable company was 14 times the price-earnings ratio. Considering that Real Madrid's historical return on investment and growth certainty were significantly better than comparable companies, a 20% premium was given, corresponding to a 17 times price-earnings ratio, and a target price of 11.76 yuan was given to maintain the purchase rating.

Risk warning

The production progress of the new project fell short of expectations; raw material prices fluctuated greatly.