The incident company released its annual report for 2023 and the first quarter report for 2024. In 2023, the company achieved total revenue of 4.369 billion yuan, a year-on-year increase of 14.86%; net profit to mother was 184 million yuan, a year-on-year decrease of 38.81%. In the first quarter of 2024, the company achieved operating income of 1,012 billion yuan, an increase of 7.84% year on year; net profit to mother was 37 million yuan, an increase of 27.38% year on year.
Main business profits are under pressure, and the 2023 performance fell short of expectations. The company's sales of fluorocarbon chemicals, fluoropolymer materials, and chemical raw materials increased 18.71%, 163.20%, and 114.67% year on year respectively; average prices fell 18.92%, 39.72%, and 37.99% year on year, respectively; gross margin fell 1.63, 13.62, and 13.96 percentage points year on year, respectively. The year-on-year decline in the average price and gross margin of fluorocarbon chemicals is mainly due to weak demand in the downstream refrigerant industry in 2023. At the same time, the industry faced certain pressure to store due to high inventories. Product prices and price differences declined to varying degrees due to supply and demand conflicts. Sales volume in the fluoropolymer materials and chemical raw materials sector increased significantly year-on-year, and the average price and gross margin declined significantly year-on-year. On the one hand, production capacity was released incrementally in some segments during the reporting period, leading to changes in product structure, which in turn lowered the average price and gross profit margin of the business sector; on the other hand, it was due to weak downstream demand for some products and falling product prices and price spreads during the reporting period. The profit of the company's main business is under pressure, compounded by factors such as increased interest expenses and increased R&D investment. As a result, the company's revenue growth in 2023 did not increase, and the performance fell short of expectations.
Improved supply and demand are driving the HFCs boom. The company's 24Q1 performance improved on the supply side. Starting in 2024, it was affected by quotas, and supply in the HFCs market was significantly tightened. On the demand side, production of products such as HFCs terminal air conditioners, refrigerators and freezers increased significantly year-on-year due to high temperature expectations in 2024 and favorable policies such as “trade-in”, driving demand for HFCs to improve. According to data from the National Bureau of Statistics, China's air conditioning, refrigerator and freezer production increased by 16.50% and 10.72%, respectively, year-on-year in 24Q1. In addition, according to industry online data, China's planned production schedule for air conditioners in April was 22.21 million units, an increase of 22.10% over the previous year. With the improvement of the supply and demand structure, the HFCs boom has risen markedly since the beginning of the year, and price spreads of various product segments have clearly rebounded, which in turn has led to a year-on-year increase in the company's 24Q1 profit. According to data from iFind and Zhuochuang, as of April 25, the average price of R32, R134a, R125, and R143a in 24Q2 increased by 25.40%, 5.09%, 11.20%, and 8.59%, respectively, compared to 24Q1. The price spreads for each product also increased to varying degrees compared to 24Q1. Considering that 24Q2 HFCs will usher in the traditional peak sales season, we believe that 24Q2's performance is expected to improve further as the upstream and downstream boom continues in the HFCs industry.
The integrated layout of the industrial chain is perfect, and the product production capacity and business scale continue to expand. The company is one of the enterprises with the most complete fluorine chemical industry chain layout in China, leading the country in terms of main product quality and production capacity. By the end of 2023, the company had production capacity under construction, including 80,000 tons/year of hydrofluoric acid, more than 40,000 tons/year of fluorinated polymer materials, and 43,000 tons/year of fourth-generation refrigerants. As the scale of the company's product production capacity continues to expand, the product structure is continuously optimized, and the fluorine chemical product industry chain is gradually extended, the share of revenue from high-value-added products such as fluorine-containing polymer materials is also expected to increase, which in turn will help consolidate the company's comprehensive market competitiveness.
The investment proposal estimates that the company's revenue for 2024-2026 will be 50.04, 58.69 billion yuan and 6.628 billion yuan, respectively, up 14.54%, 17.28%, and 12.93% year-on-year; net profit to mother will be 518, 6.59, and 775 million yuan, respectively, up 182.20%, 27.04%, and 17.70% year-on-year respectively; EPS will be 1.36, 1.73, and 2.04 yuan/share, respectively, corresponding PE 17.71, 13.94 and 11.84 times, respectively. We are optimistic about the upward performance elasticity of the fluorocarbon chemical boom and the growth of construction capacity being put into production one after another. Maintain a “Recommended” rating.
Risks indicate the risk that downstream demand falls short of expectations; the risk that the company's production capacity construction and capacity investment progress falls short of expectations; the risk of large fluctuations in raw material prices, etc.