Incident 1: The company released its 2023 annual report. In 2023, the company achieved revenue of 27.26 billion yuan, -9.9% year-on-year; net profit to mother of 3.58 billion yuan, or -43.1% year-on-year; net profit after deducting non-return to mother of 3.70 billion yuan, or -42.3% year-on-year. The fourth quarter achieved revenue of 7.91 billion yuan, +9.4% year over month, +13.3% month on month; net profit to mother 650 million yuan, -14.1% year on year, -46.7% month on month; net profit without return to mother of 8.0 billion yuan, -14.5% year on year, and -33.9% month on month.
Incident 2: The company released its 2024 quarterly report. In the first quarter, the company achieved revenue of 7.98 billion yuan, +31.8% year on month; net profit to mother of 1.07 billion yuan, +36.3% year on month, +64.2% month on month; net profit after deducting non-return to mother of 1.07 billion yuan, +37.7% year on month, +33.5% month on month.
Prices fell and coal rose, accruing expenses, and profit margins narrowed in Q4. On the one hand, due to the double impact of weak demand during the off-season and the release period of high supply-side production capacity, most of the company's core products, such as urea, acetic acid, DMF, adipic acid, and DMC, declined; when combined with the peak of traditional heating, coal prices increased month-on-month due to strong demand, and the price difference narrowed the company's profit margin; on the other hand, due to early litigation, a total of 154 million yuan in compensation for the operation of the melamine project plant. With the increase in wages and wage expenses, the company's Q4 sales and management expenses totaled +1.2 billion yuan and +0.1 billion yuan compared to the same period last year. Specifically, in terms of raw materials, according to Wind, the domestic thermal coal market price in 23Q4 was 957.7 yuan/ton, +91.5 yuan/ton (+10.6%) compared to the previous month. In terms of price spread, the average price difference of 23Q4 urea, acetic acid, DMF, adipic acid, caprolactam, and DMC was about 1480, 1936, 1997, 716, 5345, and 337 yuan/ton, respectively, +27.0%, +26.6%, -34.2%, -66.0%, +10.3%, -83.3%, -8.8%, -18.6%, -16.8%, -49.3%, +2.2%, and -64.4%, respectively.
The number of bases in Jingzhou increased significantly, and Q1 performance increased significantly. According to Hualu Group, 24Q1's Jingzhou second base achieved efficient operation at full load, with an average daily revenue of 20 million yuan and profit exceeding 4 million yuan. By sector, chemical fertilizers, organic amine series products, acetic acid and derivatives, and products related to new energy materials achieved revenue of 18.07 billion yuan, 6.19, 9.80, and 3.803 billion yuan respectively, +26.1%, -10.7%, +139.0%, +18.5%, and +0.4%, -9.9%, +30.3%, and -7.7% month-on-month. In terms of sales volume, the four major sectors achieved sales of 106.28, 13.65, 36.64, and 5411,000 tons, respectively, +43.0%, +143.9%, +24.1% year-on-year, and +7.7%, -3.5%, +39.6%, and -6.6% month-on-month.
With collaborative development and market expansion, the company made up for profit losses in the current period due to narrowing price differences for core products such as urea, acetic acid, and DMF to a certain extent, and used quantitative price compensation to drive a year-on-month increase in performance and profit.
Both wings develop side by side, and are optimistic about long-term high-quality growth. The company is a leading domestic coal chemical benchmark. Based on a coal gasification platform, the company has now formed a “one end and multiple line” circular economy flexible multi-co-production operation model, with outstanding competitive advantages at low cost.
The year 23-24 was a major increase in the company's production capacity: at the Dezhou base, the high-end solvent project (600,000 tons of DMC+300,000 tons of EMC+50,000 tons of DEC), the 3×480 t/h high-efficiency high-capacity coal-fired boiler project and some supporting technical improvement projects were successfully put into operation in 2023, enriching product categories and enhancing quality and efficiency. In April '24, the first phase of the nylon 66 high-end new material project entered the commissioning stage. After production is put into operation, it is expected to further consolidate the competitive advantage of its new nylon material group. At the Jingzhou base, in November '23, the first phase of the project (1 million tons of urea+1 million tons of acetic acid+150,000 tons of DMF+150,000 tons of methylamine) achieved a successful operation and set the fastest record for installation, commissioning, and profitability in the industry. The second phase of the project (520,000 tons of urea, 200,000 tons of BDO, 160,000 tons of NMP, 30,000 tons of PBAT, 100,000 tons of acetic anhydride, etc.) began in September '23. Currently, construction is progressing on schedule, and there is strong certainty about medium- to long-term growth.
Profit forecast and investment advice: Based on the data disclosed in the company's annual report and the 2024 coal chemical price market forecast, we adjusted the profit forecast. The company's net profit for 24-26 is 45.0 billion, 56.9 billion yuan, and 6.42 billion yuan respectively (the previous forecast was 6.16 billion yuan and 7.45 billion yuan respectively for 24-25). The PE corresponding to the current stock price is 13.4, 10.6, and 9.4 times, respectively, and the corresponding PB is 1.8, 1.5, and 1.3 times, respectively, maintaining the “buy” rating.
Risk warning: downstream demand falls short of expectations, progress of new projects falls short of expectations, increased competition, untimely information updates, etc.