Q1 Performance is under month-on-month pressure. Steadily advancing production capacity construction and investment mergers and acquisitions to help achieve the 10 billion output value target, the company released its 2024 quarterly report, achieving revenue of 475 million yuan, -10.59% YoY and -31.54% month-on-month; net profit to mother of 40.12 million yuan, -27.04% YoY and -56.22% month-on-month. The company's performance is under pressure. We expect real estate completion to decline or drag down demand for construction adhesives, as well as pressure on sealant prices due to the low price of silicone silicone DMC. The company is based on the new materials industry, consolidating its leading position in the construction glue industry, increasing the market share of industrial adhesives, and actively deploying the new energy and lithium battery materials industries. We maintain profit forecasts. The company's net profit for 2024-2026 is 4.19, 5.39, and 667 million yuan respectively, corresponding to EPS of 1.07, 1.38, and 1.71 yuan/share. The current stock price is 12.2, 9.5, and 7.7 times PE. We are optimistic that the company will steadily advance investment and mergers and acquisitions, strive to achieve the target output value of 10 billion dollars in the third decade of its establishment, and maintain a “buy” rating.
The month-on-month increase in silicone DMC prices is still at an all-time low, and the company's profitability is expected to restore profitability. The company's gross sales margin and net interest rate for the first quarter of 2024 were 22.33% and 8.46%, respectively, -1.52 and -1.90pcts, respectively, and -2.21 and -4.76pcts month-on-month, respectively, putting pressure on profitability. According to Wind data, the average price of 2024Q1 silicone DMC was 15,567 yuan/ton, -8.4% year over month; as of April 19, the price of silicone DMC was 13,800 yuan/ton, which is in the historical ranking of 2.59% since 2017; we estimate the price difference of 4,844 yuan/ton, which is in the historical position of 6.19% since 2017. Maintaining a low level of the main raw materials will help restore the company's profitability.
The construction of the silicon-carbon anode project and customer expansion are progressing smoothly. According to the company announcement, the 50,000 tons/year silicon-carbon anode material and special adhesive project for lithium batteries has completed all infrastructure construction and equipment installation has begun. In 2024, it is planned to build a 3,000 ton/year silicon-carbon anode production line. Previously, the products of the 1,000 tons/year silicon-carbon anode production line invested by the subsidiary SiBao New Energy invested and built by customers in 19 power battery factories and cylindrical battery customers and 7 3C battery factory customers have been praised by customers. It is currently being supplied in batches according to customer needs. We are optimistic that the company will promote project construction investment in an orderly manner around the new materials industry, have sufficient growth momentum, and make steady progress towards the 10 billion output value target.
Risk warning: Investment mergers and acquisitions have fallen short of expectations, fluctuating raw material and product prices, policies falling short of expectations, etc.