Net profit for Q1 in '24 was 90 million yuan, maintaining the “increase in holdings” rating

The company released its quarterly report for April 26. In Q1 of '24, it achieved revenue of 530 million yuan, yoy +23%, net profit to mother of 90 million yuan (80 million yuan after deduction), yoy +11% (+37% after deduction), and qoq -2% (after deduction of -8%). We expect the company's net profit to be 4.01/4.57/530 million yuan for 24-26, corresponding EPS of 0.68/0.78/0.90 yuan. Compared to the average PE expected by the company Wind in 24, the average PE value is 15 times. Considering the company's leading specialty surfactant position, we will give the company 17 times PE in 24 years, with a target price of 11.56 yuan to maintain the “gain” rating.

Product structure continued to be optimized, and 24q1's comprehensive gross margin was +0.0/-1.9pct to 24.2% year-on-month

The company continues to optimize the product structure, discontinue production of a large variety of products in the water reducing agent sector, and actively explore small fields such as high-end electronic chemicals and new functional resins. 24Q1's revenue for specialty functional and polymer surfactants was 530 million yuan, with sales volume of 40,000 tons, average price of 13,000 yuan/ton, yoy -2%, of which the strategic emerging sector had revenue of 140 million yuan. This sector includes high-end functional electronic chemicals and functional new material resins. The segment achieved sales volume of 11,000 tons, with an average price of 13,000 yuan/ton. 24q1's comprehensive gross margin was +0.0/ -1.9pct to 24.2% YoY, and the period expense ratio was -2.3/-0.6pct YoY to 6.6%.

Prices of raw materials have risen, and projects under construction are expected to contribute to the increase

According to Baichuan Yingfu, as of April 26, '24, the average price of propoxide in East China was 9,359 yuan/ton, +0.4% from the average price at the beginning of the quarter, and the price of raw materials increased. According to the 23rd annual report, Real Madrid is ready to put into operation the second phase with a production capacity of 30,000 tons, and has passed the Zhejiang Future Factory certification and inspection to a high standard. Lukean continues to optimize its production capacity structure, withdraw from the production of a large variety of products in the water reducing agent sector, and further promote project investment, construction, and technical reform. Construction of the Real Madrid Kaimeike Project (Phase I) with an annual output of 330,000 tons has successfully started. The successive commissioning of projects under construction is expected to increase the company's profits.

Risk warning: There is a risk that downstream demand will continue to be sluggish, and the production progress of new projects will fall short of expectations.