Core views:
The company announced financial results for the first quarter of 2024. According to financial reports, 2024Q1 achieved revenue of 1,472 billion yuan, +51.72% YoY, net profit of 150 million yuan, +101.13% YoY, net profit without return to mother of 135 million yuan, +377.67%. Performance exceeded expectations. It is expected that demand for nylon for outdoor and sports will continue to be strong, and second, the company's Huai'an project will be put into operation, and production and sales will increase; the profit growth rate is faster, mainly due to an increase in the share of differentiated products and a year-on-year improvement in the fabric dyeing and finishing business.
The level of profit increased significantly, the company focused on improving R&D capabilities, and overall expenses were well controlled during the period.
2024Q1's gross margin of sales, net interest, and non-net profit margin was 23.40%/10.17%/9.17%, compared with +2.82/+2.50/+6.26pct. Profitability improved markedly. It is expected that the nylon industry will maintain a high level of prosperity, price fluctuations on the raw material side can be smoothly transmitted to downstream customers, the company's various businesses will maintain a normal profit level, and the second is that the proportion of the company's differentiated products continues to rise. In terms of expenses, 2024Q1's sales/management/R&D/finance expense ratio was 0.88%/3.08%/5.44%/1.57%, compared to -0.25/ -1.65/0.29/ -0.30pct. The sales, management and financial expenses rates all declined. The main reason was that the company achieved significant revenue growth, and the R&D expense ratio increased slightly. The main reason was that the company took R&D innovation as the core driving force, and focused on improving independent R&D and innovation capabilities.
As a leader in differentiated nylon, I am optimistic about the company's future development. First, with the Huai'an project being put into operation, the company's differentiated nylon production capacity will increase dramatically, which will help consolidate the dominant market and consolidate the company's leading position in differentiated nylon; second, nylon 66 and recycled nylon products have high added value, which can effectively improve the company's profit level; third, the company will continue to implement the “guarantee capacity of conventional products, guarantee efficiency with differentiated products” strategy to increase R&D, improve quality and efficiency, which is expected to further improve profitability.
Profit forecasting and investment advice. EPS is expected to be 0.71 yuan/share, 0.89 yuan/share, and 0.98 yuan/share in 2024-2026, respectively. Referring to comparable company valuations, the company was given a PE valuation of 18 times that of 2024, corresponding to a reasonable value of 12.76 yuan/share, maintaining a “buy” rating.
Risk warning. Risk of fluctuations in raw material prices, risk of industry competition, risk of fluctuations in downstream demand.