Incident: The company released the 2023 annual report and the 2024 quarterly report. In 2023, the company achieved operating income of 14.63 billion yuan, down 32.89% year on year, net profit of 140 million yuan, down 95.25% year on year, after deducting non-net profit of 45 million yuan, down 98.5% year on year; in the first quarter of 2024, the company achieved operating income of 3.97 billion yuan, up 2.42% year on year, net profit of 111 million yuan year on year, up 4.18% year on year, after month average Turn a loss into a profit.
The crop protection industry actively lays out incremental markets and continues to promote the high-end silicon-based industry. During the reporting period, the company's agrochemical products achieved revenue of 4.582 billion yuan, a year-on-year decrease of 38.40%, gross profit margin of 19.75%, and a year-on-year decrease of 18.79 pcts, mainly due to a sharp decline in the average price of products. Faced with the severe situation of high inventories in the glyphosate industry and prices continued to decline, the company laid out the genetically-modified incremental drug market ahead of schedule and became the first glyphosate manufacturer in the industry to pass the national agricultural category certification. At the same time, the company accelerated the overseas registration process, with a cumulative registered reserve of nearly 4,000 units. During the reporting period, the company's revenue for silicon-based basic products was 2.21 billion yuan, down 39.85% year on year, gross profit margin -2.50%, down 28.62 pct year on year, and revenue from silicon-based terminals and specialty silane products was 2.38 billion yuan, down 34.98% year on year, gross profit margin 18.16%, down 5.04 pct year on year. The company's industrial silicon business is promoting steady production growth, and the silicone basic business has experienced unprecedented operating pressure. As product prices continue to operate at a low level and the entire industry is in a state of loss, in the face of oversupply, homogenization and low cost competition in the industry, the company actively promotes high-end, globalized and differentiated competitive strategies, and the proportion of middle and high-end customers continues to rise. The silicone terminal business is affected by the overall decline in the industry. The unit price of products has declined, and sales of high-end terminal products have steadily increased.
Sales of core products increased significantly year-on-year in the first quarter, and prices of some products bottomed out and rebounded. Prices of the company's main products fell significantly year-on-year in the first quarter of 2024, and overall sales increased year-on-year. Among them, sales of agrochemical raw drugs, agrochemical preparations, cyclic silicone rubbers, special monomers, silicon metal products, and fine chemicals increased by 68.6%, 64.2%, 62.7%, 78.3%, 14.7%, -11.2%, 12.1%, and 46.0% year-on-year, respectively. Looking at the market prices of major products, the average price of the glyphosate market in the first quarter of 2024 was 25,400 yuan/ton, down 8.8% from 2023Q4. Since the end of March 2024, the glyphosate market has bottomed out and rebounded, with a cumulative increase of 694 yuan/ton; the average price of the silicone market was 15,600 yuan/ton, up 8.3% from 2023Q4. Recently, product prices have declined somewhat, but are basically at the bottom of recent years.
Actively and orderly promote the construction of key projects to further open up room for future growth. During the reporting period, the company accelerated the entire industry and global layout, and promoted the construction of key projects in an orderly manner. The 10,000 ton water agent project was successfully put into operation at the Nigeria factory; silicone completed the establishment of overseas marketing terminals in Europe, Southeast Asia, the United States, etc., and improved the global layout for overseas demand for silicone products under the original overseas market structure based on agrochemical products. Deepen cooperation in the field of high added value of terminals, successfully signed silicone coating projects, completed framework negotiations for cooperation projects such as aerogels and silane gas, and engage in international strategic cooperation in the field of functional silane.
Accelerate the development of the new energy industry, complete graphitization investment cooperation, and steadily promote the development of high-end anode projects.
Projects such as ammonium glyphosate, Yanchin industrial silicon, special silicone, high-purity polysiloxane, phosphorous flame retardants, and graphite anode materials for high-end lithium-ion batteries are progressing in an orderly manner, laying the foundation for growth in various industries in 2024.
Give an “increase in wealth” investment rating. Due to falling prices of silicone and glyphosate products, the company's net profit from 2024-2026 is estimated to be 452 million yuan, 735 million yuan, and 1,015 million yuan respectively, and EPS is 0.34, 0.54, and 0.75 yuan respectively. The current stock price corresponding to PE is 26, 16, and 11 times, respectively. Recently, glyphosate prices have bottomed out and the rating of silicone prices is running at the bottom, giving a “gain”.
Risk warning: Product prices fall, raw material prices fluctuate, new projects put into production fall short of expectations.