Incidents:
The company released its quarterly report for 2014. 24Q1 achieved operating income of 1.47 billion yuan, a year-on-year increase of 52%, a year-on-month decrease of 7%; realized net profit of 150 million yuan, an increase of 101% year-on-year and a year-on-month increase of 23%; and realized net profit after deduction of 135 million yuan, an increase of 378% year-on-year and 16% month-on-month increase.
The nylon industry continues to recover, and the company's performance exceeds expectations
The company's performance increased dramatically in the first quarter of '24, mainly since the end of '22, the nylon industry's boom continued to recover. According to Longzhong Information and Baichuan Yingfu data, the average price of nylon POY, DTY, and FDY has risen from 1.57, 1.81, and 16,500 yuan/ton in 23Q1 to 1.70, 1.93, and 181,000 yuan/ton in 24Q1, up 8.3%, 6.6%, and 9.7%, respectively. The operating rate of nylon fiber in China also increased quarterly from 64% in 23Q1 to 77% in 24Q1. The company's 24Q1 gross margin increased 2.82 pct year over year to 23.4%, and net margin also increased 2.50 pct year over year to 10.17%.
Looking ahead to the future market, the prosperity of the nylon industry is still in an upward cycle. The company's profitability in nylon filament and back-end textile, dyeing and finishing, blanks, and fabrics is expected to increase further, and performance is expected to grow further.
Furthermore, Mr. Shi Qingdao, the chairman of the company, received a notice from the local public security bureau to collect evidence in the case and actively cooperated with the investigation, without affecting his normal performance of duties. Currently, the company's board of directors is operating normally, and production and operation are normal.
Differentiated development strategies continue to open up room for growth
The company adheres to a differentiated development strategy, and the key layout of nylon 66 spinning, blanks, and fabrics is expected to fully benefit from the wave of localization of upstream adiponitrile. Recycled nylon is an important development direction in the current global carbon reduction context. The company is building the first 10,000-ton nylon chemical regeneration device in China, which is expected to add new momentum to the company's development; currently, the first phase of the company's PA66 differentiated nylon 16 nylon wire project is being tested in April 23, and it is expected that all production capacity will be released in the first half of 2024; the recycled differentiated nylon yarn project with an annual output of 100,000 tons is also progressing in an orderly manner, continuing to open up space for the company's growth.
Profit Forecasts, Valuations, and Ratings
We expect the company's revenue for 2024-26 to be 63/77/8.8 billion yuan, respectively, with corresponding growth rates of 24%/22%/15%, and net profit to mother of 6.6/8.2/1.0 billion yuan, respectively, corresponding growth rates of 47%/24%/23%, EPS of 0.74/0.92/1.13 yuan/share, respectively, and a 3-year CAGR of 31%. In view of the strong growth of the company's recycled nylon and nylon 66 business, we maintained the company's target price of 16.6 yuan, corresponding to 22 times PE in 2024, maintaining a “buy” rating.
Risk warning: risk of projects under construction falling short of expectations, risk of weak demand in the nylon industry, risk of market development falling short of expectations