Incident: The company released its 2023 and 2024 quarterly reports. In 2023, the company achieved operating income of 2,597 million yuan, a year-on-year decrease of 3.23%, a year-on-year decrease of 23.27%, after deducting non-net profit of 240 million yuan, a year-on-year decrease of 21.59%; in the first quarter of 2024, the company achieved operating income of 744 million yuan, a year-on-year increase of 12.35%, and net profit of 76 million yuan, a year-on-year decrease of 3.85%. At the same time, the company announced that it plans to invest 1,598 billion yuan to build a new material relocation and upgrading project with an annual output of 730,000 tons (Xinhua Stock Industrial Base Phase I).
Product prices have generally declined throughout the year, and the main products have a strong competitive advantage. In 2023, the company achieved revenue of 1,232 billion yuan, a year-on-year decrease of 13.97%, gross profit margin of 16.56%, a year-on-year decrease of 4.21 pcts, sales volume of 101,000 tons, a year-on-year decrease of 5.85%, an average sales price of 12,000 yuan/ton, a year-on-year decrease of 8.62%; organic solvents achieved revenue of 487 million yuan, a year-on-year increase of 11.78%, a year-on-year increase of 0.55 pcts, and a year-on-year decrease of 610,000 tons. 7.90%; synthetic fragrances achieved revenue of 519 million yuan, down 0.59% year on year, gross profit margin of 20.58%, down 3.57 pct year on year, sales volume of 14,800 tons, up 2.34% year on year, and average sales price of 35,000 yuan/ton, down 2.86% year on year. The company's main business is fatty amines, organic solvents, and synthetic fragrances. The main products isopropylamine, ethylamine and isopropyl alcohol have strong competitive advantages in China in terms of plant size, process technology, production cost and market share.
Product sales increased year-on-year in the first quarter, and product prices remained slightly fluctuating month-on-month. In the first quarter of 2024, the company's fatty amine revenue was 362 million yuan, down 4.0% year on year, sales volume was 310,000 tons, up 5.2% year on year, average sales price was 11,800 yuan/ton, down 8.8% year on year; organic solvent revenue was 123 million yuan, up 15.5% year on year, sales volume was 14,800 tons, up 15.0% year on year, average sales price was 8,341 yuan/ton, up 0.44% year on year; fragrance and fragrance revenue was 185 million yuan, up 52.9% year on year, sales volume up 61.6% year on year. 34,300 yuan/ton, a year-on-year decrease of 5.4%. Looking at the core product market, the average market prices for isopropylamine, triethylamine, and isopropyl alcohol in 2024Q1 were 11,600, 151,000, and 0.84 million yuan/ton respectively, up 2.0%, -6.6%, and 1.3% from 2023Q4, respectively.
Actively lay out new products and projects, and there is plenty of room for growth in lithium extraction. During the reporting period, the Jiangsu Xinrui Phase III project completed EIA approval, and the company's lithium extraction project was gradually implemented, and the extractive lithium precipitated lithium mother solution industrialization test project signed with Salt Lake Co., Ltd. and Lanke Lithium were successfully put into operation in July 2023; in the field of lithium battery recycling, the company cooperated with Jiangsu Yaoning New Energy Co., Ltd. to build a 10,000 tons/year waste lithium recycling production line, and successfully applied the extractant to Grimmie battery recycling production line. The company is building a 74,650 tons/year synthetic fragrance product base project at Ningdong Energy and Chemical Base in Ningxia. The first phase has a production capacity of 26,650 tons/year (including 10,000 tons/year of raw materials for personal use), and the second phase has a production capacity of 48,000 tons/year. The first phase is expected to reach the scheduled state of use in June 2024. In addition, the company plans to build a new material relocation and upgrading project with an annual output of 730,000 tons at the Ocean base, including 10,000 tons/year of specialty amine, 10,000 tons/year of new formylated materials, 3,000 tons/year of TMDD, 20,000 tons/year isophorone, 10,000 tons/year of ethylene amine series products, 10,000 tons/year of tert-butylamine, 10,000 tons/year of cyclopentanone, etc., to further open up future growth space.
Maintain an “overweight” investment rating. The company's net profit for 2024-2026 is estimated to be 339 million yuan, 432 million yuan, and 532 million yuan, EPS is 1.83, 2.33, and 2.86 yuan, respectively. The PE corresponding to the current stock price is 14.6, 11.4, and 9.3 times, respectively, maintaining the “increase in holdings” rating.
Risk warning: product prices are falling, raw material prices are rising, and the commissioning of new projects falls short of expectations.