The company's net profit in '23 was 160 million yuan, down 44.32% year on year. The company released its annual report for '23 and quarterly report for '24. It achieved revenue/net profit to mother of 35.82/160 million yuan in '23, -3.58%/-44.32% year-on-year, and realized net profit without deduction of RMB 146 million, or -44% year-on-year.
Among them, Q4 achieved revenue/net profit to mother of 1,06/019 million yuan in a single quarter, +0.57%/-63.96% year-on-year, and net profit without return to mother of 0.17 million yuan, or -65.68% year-on-year. 24Q1 revenue/net profit attributable to mother was 579/021 million yuan, -13.07%/-47.83% year-on-year, after deducting net profit of 20 million yuan, or -47.90% year-on-year.
Admixture revenue declined in '23, and technical testing performance improved
The company's revenue from admixtures fell 8.85% year on year to 2,662 billion yuan. Revenue from high-performance water reducing agents/high-efficiency water reducing agents/ functional materials was 20.4/1.03/520 billion yuan respectively, -12.1%/+4.9%/+3.6% year on year. We expect that it will be mainly dragged down by the civilian side. Key projects such as the Sichuan-Tibet Railway, offshore wind power, nuclear power, and undersea tunnels will still provide some support. The company sold 102.2/5.1/269,000 tons of high-performance water reducing agents/functional materials in 23 years, -7.8%/+9.9%/-5.7% year-on-year, with prices of -4.75%/-4.61%/+9.94% year-on-year respectively. Sales of 24Q1 high-performance water reducing agents continued to decline 16% year over year, and prices fell 6%/10% month-on-month, but the price of functional materials 24Q1 rose markedly from month to month, which is expected to be mainly affected by product structure. In 23, the company's high-performance water-reducing agent synthesis capacity was expanded to 740,000 tons, the production capacity of high-efficiency water-reducing agents was reduced to 210,000 tons (two production lines shut down), and the second phase of the Zhenjiang Functional Materials Base project was completed. The company's competitiveness in the fields of offshore wind power and transportation materials is expected to improve. In terms of overseas business, the company actively explores markets in Southeast Asia, Africa and other places along the “Belt and Road”, with overseas revenue of 140 million in '23, an increase of 37% over the previous year, accounting for 4%.
The company's technical service achieved revenue of 760 million yuan in 23 years, an increase of 12.25% over the previous year, and the testing center achieved a 10% year-on-year increase in net profit of 162 million yuan. The testing business has become an important support for the company's performance.
Gross profit margin increased steadily in '23, and higher expenses dragged down net profit
The overall gross profit margin of the company in '23 was 35.12%, +0.81pct year on year, and the gross margin of high-performance water reducing agents/functional materials/technical services was 31.21%/22.04%/31.36%/51.35%, respectively, -0.04/+4.17/+1.29/+1.02pct, respectively. Overall increase in gross margin or mainly affected by cost reduction, the average purchase price of ethylene oxide/formaldehyde was -13.41%/-15.1% year on year. Among them, the overall gross profit margin for Q4 in a single quarter was 35.31%, +0.61/+2.25pct yoy, respectively. The cost ratio for the 23-year period was 26.48%, +2.65pct year on year. Among them, the sales/management/ R&D/finance expenses ratio was +0.75/+1.35/+0.51/+0.04pct year on year, respectively, and finally achieved a net interest rate of 6.52% and -3.12 pct year on year. The balance ratio at the end of 23 was 40.80%, +0.10pct year over year. Net operating cash flow of +151 million yuan reached 370 million yuan year on year, mainly due to a revenue ratio of +4.04pct year over year of 109.49% and a payout ratio of -3.79 pct year on year of 99.10%. Cash flow operation was good. The 24Q1 company's overall gross profit margin was 35.04%, -1.53/-0.27pct YoY, 6.21% net profit margin, and -2.50/+2.76pct YoY, respectively.
Optimistic about the company's growth and maintain a “buy” rating
The company's 23-year dividend rate is 40%. We believe that as the company's production capacity investment+penetration rate increases, the profit flexibility of water reducing agents is expected to gradually be released, and the functional materials and overseas sectors have more potential for growth. Taking into account the slow recovery in demand, the company's 24-25 net profit forecast was lowered to 24/ 280 million yuan (previous value: 35/440 million yuan), and an additional 26-year net profit forecast of 330 million yuan was added, giving the company 18 xPE for 24 years, with a target price of 9.78 yuan, maintaining the “buy” rating.
Risk warning: Production capacity investment falls short of expectations, declining demand, rising raw material prices, etc.