Shengquan Group announced its 2023 annual report. In 2023, the company achieved operating income of 9.120 billion yuan, a year-on-year decrease of 4.98%; net profit to mother was 789 million yuan, an increase of 12.23% over the previous year.
The decline in revenue and profit in 2023 is due to a decrease in sales prices. 1) By product, revenue from phenolic resins, foundry resins, and electronic chemicals changed by 1.02%, -22.20%, and -6.72% year-on-year to 35.23, 15.99, and 1,184 billion yuan, respectively. The average sales price (excluding tax) changed by -20.00%, -28.93%, and -16.86% to 0.72, 1.01, and 174,000 yuan/ton, respectively. 2) In 2023, the company's gross sales margin and net sales margin were 23.02%/8.80%, respectively, with a year-on-year change of 1.96pct/1.39pct. 3) The three cost rates increased by 0.29pct year-on-year to 12.52%. Among them, sales, management, and financial expense ratios changed year-on-year - 0.16, 0.37, 0.08pct to 3.55%, 8.52%, and 0.45%. In 2023, the company's R&D expenses accounted for 4.74% of revenue, a year-on-year decrease of 0.02 pcts.
4) The amount of cash dividends (including tax) was 339 million yuan, accounting for 42.90% of net profit attributable to common shareholders of listed companies.
The company diversifies the layout of new materials and continues to develop new products. 1) The project with an annual output of 1000 tons of functionalized polyphenylene ether will be put into operation in the 2nd quarter of 2024. 2) With the commissioning of the second phase of the Zhuhai project, the production capacity of special epoxy resins will be greatly increased. Various types of high-purity epoxy will achieve continuous growth in the fields of sealed boards, high-end EMC, underfill, DAF, LMC, ACF, plug hole inks, and high-end inks. 3) The “1 Million Tons/Year Biomass Refining Integration (Phase I Project) Project” at the Daqing production base has completed installation, commissioning and pre-trial production of production processes, machinery and equipment. The production line was officially fully put into operation in May 2023, successfully achieving a leap forward in upgrading from “process” to “industry”. 4) The company successfully developed and mass-produced a variety of high-end electronic chemicals such as specialty electronic resins, phenol biphenyl epoxy, crystalline epoxy, DCPD epoxy, maleimide resins, hydrocarbon resins, and PHS resins for KrF photoresist. M6/M7/M8 grade 5G special electronic resin has been certified by domestic and foreign end customers and industrial chains.
The company attaches great importance to green production to reduce costs, increase efficiency, save energy and protect the environment. The COBT wastewater treatment technology developed by the company not only enables the company's wastewater treatment to meet the requirements of national standards, but also effectively recycles free phenol in the wastewater, achieving in-depth treatment of wastewater and creating economic benefits. The company uses lignin, pentose, etc. instead of some furfuryl alcohol to produce modified furan resins, improving resin activity and strength, reducing sulfur content in resin sand, reducing surface sulfurization of castings, improving casting yield, and reducing formaldehyde emissions during production and casting, and has the advantages of environmental protection, efficiency, and low consumption.
Profit forecasts and reference ratings. We expect the company's EPS in 2024-2026 to be 1.14, 1.47, and 1.68 yuan respectively (the original forecast for 24-25 was 1.11 and 1.15 yuan). Referring to the valuation of comparable companies in the same industry, we think a reasonable valuation is 26 times PE in 2024, corresponding to a target price of 29.64 yuan (original target price 25.50 yuan, 25 times PE valuation in 2023, +16%), maintaining a “superior to market” rating. Risk warning. The progress of projects under construction fell short of expectations, and raw material market prices fluctuated.