Incident: Jiang Han New Materials released its 2023 annual report. The company achieved operating income of 2,277 billion yuan, a year-on-year decrease of 31.2%; realized operating profit of 754 million yuan, a year-on-year decrease of 37.8%; and net profit attributable to shareholders of listed companies was 655 million yuan, a year-on-year decrease of 37.0%. Based on the total share capital of 373 million shares, basic earnings per share were 1.78 yuan (1.75 yuan after deduction), and operating cash flow per share was 1.91 yuan. Among them, the fourth quarter achieved operating income of 526 million yuan, a year-on-year decrease of 19.0%; realized net profit attributable to shareholders of listed companies of 120 million yuan, a year-on-year decrease of 42.6%; equivalent to EPS of 0.32 yuan per quarter.
The sharp drop in sales prices of functional silane products in 2023 is the main reason for the decline in the company's revenue and profit scale. In 2023, the company achieved revenue of 2,277 billion yuan, a year-on-year decrease of 1,034 billion yuan, yoy -31.2%. By business, in 2023, functional silane and functional silane intermediates in the company's main business achieved revenue of 22.33 billion yuan and 0.28 billion yuan respectively, accounting for 98.0% and 1.2% of business revenue respectively.
The company used the scale effect of sales growth to offset the downturn in some industries. In 2023, the production capacity of the company's fund-raising projects was gradually released, and the scale of production and sales increased year-on-year. The company produced 272,700 tons of functional silane and intermediates, up 20.6% year on year; total sales were 106,900 tons, up 16.7% year on year, of which 104,400 tons of functional silane were sold, up 15.8% year on year, and the annual production and sales rate of functional silane was 100.10%. In terms of price, demand for functional silane declined in most overseas markets such as Europe, America, Japan, and South Korea in 2023. Coupled with the continuous increase in total production capacity of the industry, the market showed oversupply, and prices fell to a historically low range since the second half of '22. The average sales price of the company's functional silane was 21,400 yuan/ton, yoy -41.1%; the average sales price of functional silane intermediates was 15,900 yuan/ton, yoy -51.3%.
In 2023, the company's gross profit was 855 million yuan, a year-on-year decrease of 559 million yuan; the comprehensive gross profit margin was 37.6%, yoy-5.1 pcts. By business, the company's functional silane business gross profit was 844 million yuan, yoy-557 million yuan, gross margin was 37.8%, yoy-5.0 pcts; functional silane intermediates business gross profit was 0.1 billion yuan, yoy-0.2 billion yuan; gross margin was 37.5%, yoy-10.1 pcts.
The company has strong cost management capabilities to withstand the impact of a sharp drop in product prices on profit levels. In terms of expenses, the company's sales/management/R&D/finance expenses in 2023 were 0.17/0.93/0.69/ -0.77 billion yuan respectively, totaling 101 million yuan, with year-on-year changes of -0.05/-0.36/-0.48/+ 0.31 billion yuan; the cost rates were 0.74%/4.06%/3.03%/-3.39%, respectively, yoy+0.8/+0.17/-0.51/-0.21pcts, respectively. Among them, in terms of financial expenses, the company hedged the uncertainty caused by exchange rate changes through foreign exchange forward settlement tools, and achieved a net profit and loss of 8.6865 million yuan after hedging the current exchange profit and loss of 0.2 billion yuan.
Steadily promote a package of new silicon-based materials projects and expand production capacity for main products. The company is a leading domestic functional silane enterprise. It has 14 series of more than 100 functional silane products. The product variety is rich and the structure is diverse, and it can meet the needs of different customers in various fields. The company promoted the construction of the first phase of the Silicon-based New Materials Green Recycling Industrial Park project to build a green recycling industry chain with an annual output of 182,000 tons of functional silane to unify scale expansion and green development.
Profit forecast and valuation: Combined with the company's product price trends and future production capacity investment pace, the company's net profit from 2024 to 2026 is estimated to be 7.1/80/9.3 billion yuan (2024 and 2025 before 2024 and 2025 was 82/91 billion yuan), respectively, maintaining a “buy” investment rating.
Risk warning: macroeconomic downside risk, risk of large fluctuations in product and raw material prices, risk of new construction project progress and profits falling short of expectations