The company released its 2023 annual report and 2024 quarterly report. In 2023, the company achieved revenue of 14.631 billion yuan, yoy -32.89%, net profit of 140 million yuan, yoy -95.25%, net profit after deducting non-return to mother of 45 million yuan, yoy -98.50%, of which Q4 achieved revenue of 2,340 million yuan (yoy -36.30%, qoq -38.65%) and net profit to mother of 36 billion yuan (yoy -141.04%, qoq -157.41%). In 2024, Q1 achieved revenue of 3,974 billion yuan (yoy +2.42%, qoq +69.81%) and net profit of 111 million yuan (yoy +4.18%). The company's product prices stabilized in the first quarter, and quarterly results turned a month-on-month loss into a profit.
Glyphosate: Prices have gradually recovered steadily since 2024. In 2023, due to early overpurchases in major global pesticide markets, domestic companies' pesticide product inventory digestion cycle was extended, and glyphosate prices continued to decline. According to the company's announced operating data, the annual agrochemical raw material price fell 43.38% to 354,000 yuan/ton, agrochemical self-production achieved revenue of 4.582 billion yuan, a year-on-year decrease of 38.4%, gross margin fell 18.79 pcts year on year to 19.75%, and the decline in glyphosate prices in 2023 put pressure on the company's agrochemical self-production sector's profit. Glyphosate prices have shown signs of a steady recovery since 2024. As inventory removal comes to an end, the pesticide industry is bottoming out, and product prices are expected to gradually pick up. At the same time, the commissioning of products such as phosphonium glyphosate is expected to drive continuous improvement in the company's performance.
Silicon-based materials: Weak domestic and foreign demand performance has led to poor profits on the basic side, steadily improving product terminalization. Domestic and foreign demand in 2023 was affected by weak global economic growth, inflation, etc. The domestic silicone market continued to decline after a brief rise. On the one hand, the upstream raw material silicon continued to weaken, and on the other hand, new monomer production capacity was gradually released. However, the market was already oversupplied. Due to cost pressure, single manufacturers could only choose to reduce the load or stop their cars, and the entire industry was in a state of loss. According to Baichuan Yingfu statistics, the average domestic silicone DMC price in 2023 was 14,921 yuan/ton, a year-on-year decrease of 37%. The company is focusing on terminal and high-end development. At present, new silicon-based materials have formed a total of more than 3,000 terminal product clusters, and sales of terminal products are steadily increasing.
Adjust profit forecasts and maintain an “gain” rating. Considering that it will take time to recover demand for silicon-based materials and agrochemicals, we adjusted our profit forecast. The company's net profit for 2024-2026 is 5.33, 7.87, and 958 million yuan (originally 742 million yuan and 1,045 million yuan, with an additional net profit of 988 million yuan in 2026). The corresponding PE is 21X/14X/12X, maintaining the “increase” rating.
Risk warning: Product prices fall; construction under construction falls short of expectations; risk of falling demand.