Key points of investment:
The company released its 2023 annual report, and the results fell slightly short of expectations. In 2023, the company achieved operating income of 4.369 billion yuan (yoy +14.9%), realized net profit of 184 million yuan (yoy -38.8%), net profit after deduction of 113 million yuan (yoy -57.8%). Overall gross sales margin decreased by 3.82 pct to 14.63% year on year. Sales expenses, management expenses, R&D expenses, and financial expenses increased by 23.7%, 11.5%, 73.2%, 1216.3% to 0.7, 2.6, 0.9, and 50 million yuan, respectively. R&D expenses The reason for the sharp increase was the increase in the company's R&D investment in new products, new processes, and new technology, and the new R&D investment by Shao Wuyong and the newly established research institute. The increase in financial expenses was due to increased interest expenses on convertible bonds and financing interest expenses of financial institutions, and the performance was slightly lower than expected. Among them, 4Q23 achieved operating income of 1,140 million yuan (yoy +5.2%, QoQ -0.8%), net profit to mother of 0.22 million yuan (yoy -70.1%, QoQ -58.4%), net profit after deduction of -38 billion yuan, 4Q22 was 69 million yuan, 4Q23 gross margin decreased by 10.02 and 2.60 pct to 11.49%, respectively. 4Q23 sales expenses, management expenses, R&D expenses, and financial expenses increased 7.4% and 19.0, respectively. %, 50.1%, 19.4% to 0.19, 0.86, 0.27, and 0.24 billion yuan. The main reasons for the year-on-year decline in net profit to mother in 4Q23 were:
1. Jinhua Yonghe maintenance of some installations; 2. Costs increased year-on-year; 3. Prices of fluorocarbon chemicals and fluoropolymer materials fell year-on-year.
The company released its 2024 quarterly report, and the results were generally in line with expectations. 1Q24 achieved operating income of 1,012 billion yuan (yoy +7.8%, QoQ -11.2%), net profit to mother of 37 million yuan (yoy +27.4%, QoQ +72.1%), net profit after deducting non-return to mother of 37 million yuan (yoy +57.11%, 4Q23 was -38 million yuan), and 1Q24 gross margin increased 0.53 and 5.77pct, respectively. Looking at the situation of various subsidiaries, 1Q24 Jinhua Yonghe achieved net profit of 32 million yuan, Inner Mongolia Yonghe achieved net profit of 40 million yuan, Shao Wu Yonghe's net profit loss of 0.22 million yuan, Baotou Yonghe's net profit loss of 203 million yuan, and Binglong Environmental Protection achieved net profit of 0.04 billion yuan. The results were basically in line with expectations. The main reason for the year-on-month increase in net profit in 1Q24 was the year-on-year increase in fluorocarbon chemicals (refrigerants) prices and profits.
Production and sales of fluorocarbon chemicals increased year-on-year in 2023, but prices and gross margins declined. After entering 2024, refrigerant prices and profits continued to improve. Price increases of some refrigerants lagged behind, exports gradually improved, and refrigerant foreign trade prices are expected to rise. In 2023, the company's fluorocarbon chemical production and export sales increased by 10.53%, 18.71% to 20.3, and 114,000 tons, respectively. The average sales price without tax fell 18.92% year on year to 20,800 yuan/ton, gross margin fell 1.63 pct year on year to 7.75%, and operating income fell 3.75% year on year to 2,358 million yuan, accounting for 53.95%. In 1Q24, quotas were strictly enforced. Production and sales of fluorocarbon chemicals fell 13.54% and 16.86% year-on-year respectively, and fell 13.45% and 26.90% to 4.37 and 203,000 tons, respectively. However, prices and gross margins continued to improve. 1Q24's average price without tax for fluorocarbon chemicals rose 8.12% and 5.36% to 23,000 yuan/ton, respectively. According to Baichuan Yingfu's pricing company, the factory price of refrigerant 143a has risen from 19,000 yuan/ton in early November 2023 to 60,000 yuan/ton at present. Profits have increased dramatically, but the foreign trade price of 143a has not yet risen sharply, and the foreign trade quota accounts for 75%. With the subsequent recovery of exports, foreign trade prices are slowly rising. Low-end prices of mainstream third-generation refrigerants R32, R125, and R134a in Zhejiang increased by 13,750, 17,500, and 4,500 yuan/ton to 30,500, 4,500 yuan/ton, and 31,500 yuan/ton, respectively, from the beginning of the year. The second quarter is the peak season for traditional refrigerants, and 2Q24 results are expected to show a significant increase over the same period last year.
In 2023, new fluoropolymer material projects were put into operation one after another. Production and sales increased significantly year-on-year, but prices and gross margins were under pressure. According to the annual report, in 2023, Shao Wuyong and 10,000 tons of HFP, 0.75 thousand tons of FEP, 10,000 tons of PTFE, 0.05 million tons of PPVE, 50,000 tons of PVDF, and 30,000 tons of HFPO, and Inner Mongolia Yonghe put into trial production one after another. In 2023, production and sales of fluorinated polymer materials increased by 113.91%, 163.2% to 39,000 tons, respectively. Operating revenue increased 58.7% year on year to 1,347 million yuan, accounting for 30.83% of total revenue, the average price without tax fell 39.72% year on year to 49,000 yuan/ton, and gross margin fell 13.62 pct to 23.90% year on year, mainly due to relatively low gross profit HFP, PTFE, and PVDF production lines were completed and put into operation, and changes in the variety structure of fluoropolymer materials increased the gross profit margin Caused by the level. 1Q24 The price decline of fluoropolymer materials narrowed, and production and sales continued to grow. The average price of 1Q24 fluorinated polymer materials without tax decreased by 38.13% and 1.50% to 42,100 yuan/ton, respectively. Production and sales increased by 94.93% and 146.24%, respectively, and increased 15.48% and 12.24%, respectively, to 1.33 and 0.96 million tons. The company currently has an annual production capacity of 67,800 tons of fluorinated polymer materials and monomers. The production capacity under construction includes 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. Looking at the situation of various subsidiaries, 1Q2024 Annuity Huayonghe achieved net profit of 32 million yuan, Inner Mongolia Yonghe achieved net profit of 40 million yuan, Shao Wu Yonghe's net profit loss of 202 million yuan, Baotou Yonghe's net profit loss of 03 million yuan, and Binglong Environmental Protection achieved net profit of 0.04 billion yuan.
Stock efficiency is improved, incremental improvements are made, the layout of fourth-generation refrigerants and fluorine-containing polymer materials is being accelerated, and construction projects are progressing in an orderly manner. The company currently has an annual production capacity of 67,800 tons of fluorinated polymer materials and monomers. The production capacity under construction includes 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. By the end of 1Q2024, the company's fixed assets increased by 1,108 billion yuan to 2,912 billion yuan compared to the end of 2022, and the number of projects under construction increased by 48 million yuan to 1,528 billion yuan.
Investment analysis: HFCs quotas have been issued for various companies in 2024. The bottom inflection point of the refrigerant price difference brought about by optimizing the industry pattern and exceeding expectations will rise. The company is stepping up efforts to extend the industrial chain to high-value-added products such as fluoropolymers and fluorine fine chemicals, and forward-looking layout of four generations of refrigerants to establish a high growth rate and growth rate of future performance. We maintain the 2024-2025 net profit forecast of 558 million yuan and 781 million yuan, respectively, and add the 2026 net profit forecast of 1,015 million yuan, corresponding EPS of 1.47, 2.05, and 2.67 yuan, respectively. The current market value corresponds to PE of 17, 12, and 9 times, maintaining the “increase in holdings” rating.
Risk warning: 1) The price increase of the company's third-generation refrigerants fell short of expectations; 2) the progress of the new project fell short of expectations; 3) the recovery in demand in the downstream real estate and automobile industry fell short of expectations