Core views

The company achieved significant improvements in revenue and profit margins in the first quarter, and downstream demand began to pick up; it is anticipated that subsequent sebacic acid projects will gradually expand as overseas customers develop, the Q1 inflection point will be established, and the company's performance growth will continue. Furthermore, although the fund-raising project has been postponed, process data such as polymerization time and glass fiber addition ratio have been significantly optimized; the company and China Merchants Bureau are continuing to advance. Currently, the company's bio-based polyamide products have cooperated in the fields of containers, refrigerated trucks, and new energy, and are expected to be promoted at an accelerated pace with the help of the China Merchants Bureau.

occurrences

On April 14, the company released a performance forecast for the first quarter of '24. The company achieved revenue of 65-720 million yuan in Q1, +29% ~ 42% YoY, +18% ~ 31% month-on-month; net profit to mother of 0.94-115 million yuan, +64% ~ 100% YoY, +77% to 117% month-on-month.

Brief review

Q1 Revenue increased month-on-month, and profit margins improved significantly

The company's Q1 revenue side ushered in a clear inflection point. The main reason was that downstream demand picked up, and the company's traditional main business, long-chain dibasic acid, and sebacic acid, a new project, began to expand. Currently, sebacic acid is mainly produced using castor oil as a raw material. Its high-temperature cracking production process has high carbon emissions. Compared with Kaiser Biotech's sebacic acid, carbon emissions over the entire life cycle are reduced by 40%, and it also has lower ash content and better thermal stability. The company's 40,000 ton sebacic acid project was put into operation in 2022 and is in the process of gradually climbing. Since the downstream market for sebacic acid is mainly overseas, and overseas customers usually have high supply stickiness, we expect that once the company's sebacic acid project starts to expand, the subsequent growth will continue. I'm optimistic about the company's next startup pace.

In terms of profit, the company's Q1 (return to mother) net interest rate was 15.3%, +4.0pct year over year, and +5.7pct month-on-month. Under measures to reduce costs and increase efficiency, the company experienced a significant year-on-month improvement in profit levels in the first quarter.

Fundraising project postponed to continuously optimize bio-based polyamide processes

Considering the construction of supporting facilities in the park and the pace of release of customer demand, the company postponed the construction of the “500,000 ton pentanediamine and 900,000 ton bio-based polyamide project” by one year until the end of 2025, and first built part of the production capacity by the end of 2024.

In terms of technical optimization, Kaiser verified the original bio-based nylon one-step method on a 5,000 ton pilot line in 2023, shortening the polymerization time to less than 1% of the traditional process, and increasing the amount of glass fiber added to bio-based composites to more than 70% on the 10,000 ton line, which is conducive to reducing the cost of bio-based nylon composites and their application in logistics, new energy, construction, etc.

The China Merchants Bureau's fixed increase continues to advance, empowering the company's development

Kaisai Biotech's new bio-based materials can be used in various industrial sectors such as ports, shipping, logistics, and green buildings under China Merchants Group. Currently, the company has cooperated with China Merchants Group companies on bio-based nylon composites. Among them, the container manufacturing sector has completed classification society certification, and products are being tested; products in the refrigerated car sector are in use, and product samples are being carried out in the fields of trays, construction templates, and new energy photovoltaics; the textile manufacturing sector has completed the finalization of related products.

China Merchants Group's pilot testing will have a good demonstration effect on the widespread use of Kaiser Biotech's series of bio-based polyamides and their composites, helping Kaiser Biotech explore the market and achieve leapfrog development.

Profit forecasting and valuation: The company's main business boom has reached an inflection point, and the China Merchants Bureau is expected to accelerate the promotion of bio-based polyamides. The company's net profit for 2023-2025 is estimated to be 367 million yuan, 596 million yuan, and 882 million yuan. The corresponding PE is 64.6X, 39.8X, and 26.9X, respectively, maintaining a “buy” rating.

Risk warning: raw material prices fluctuate; downstream demand falls short of expectations; project commissioning falls short of expectations, fixed growth falls short of expectations, etc.