Core views
In 2023, the company achieved revenue of 6.018 billion yuan, a year-on-year decrease of 0.31%; net profit to mother was 197 million yuan, a year-on-year decrease of 18.78%. In the first quarter of 2024, the company achieved revenue of 1,639 billion yuan, an increase of 28.49% over the previous year, and achieved net profit of 70 million yuan to mother, an increase of 40% over the previous year.
Looking ahead to 2024, the company has successfully put into operation 180,000 tons in Tengzhou, further enhancing the company's cost advantage while releasing production capacity. In the future, the company's PA6 and PA66 production capacity will continue to expand. PA6 production capacity includes 124,000 tons in Hangzhou and 220,000 tons in Tengzhou II, Shandong. PA66 production capacity includes 80,000 tons in Zibo, and growth can be expected.
occurrences
The company released its 2023 annual report and 2024 quarterly report
In 2023, the company achieved revenue of 6.018 billion yuan, a year-on-year decrease of 0.31%; net profit to mother was 197 million yuan, a year-on-year decrease of 18.78%. The net profit corresponding to Q1-Q4 was 0.50, 0.50, 0.50, and 47 million yuan, respectively.
In the first quarter of 2024, the company achieved revenue of 1,639 billion yuan, a year-on-year increase of 28.49%, and achieved net profit attributable to mother of 70 million yuan, an increase of 40% over the previous year, and achieved net profit without deduction of 64 million yuan, an increase of 29.63% over the previous year.
Brief review
R&D expenses increased in 2023, and performance declined. In 2023, the PA6 industry was under pressure, and the price spread declined. The company actively promoted technological transformation and technological innovation, expanded core competitiveness, while improving the level of marketing management, actively exploring the market to ensure that products achieve balance between production and marketing, and still achieve stable profits; at the same time, R&D efforts were increased, and R&D expenses increased. 2024Q1 In terms of price differences, according to Wind, the average domestic PA6 price in 2023 was 13,354 yuan/ton, down 6.82% year on year, and the average price of caprolactam was 12,605 yuan/ton, down 4.10% year on year. In 2023, the company's gross margin of nylon slicing was 6.70%, an increase of 0.35pct over the same period last year. In terms of production and sales, the company's output in 2023 was 471,900 tons, up 4.03% year on year, and sales volume was 477,800 tons, up 6.04% year on year.
The overall net profit per ton is about 412 yuan. In 2023, the company's R&D expenses were 158 million yuan, an increase of about 46.77 million yuan over the previous year, and achieved a net profit of 197 million yuan to mother, a decrease of 18.78% over the previous year.
In the first quarter of 2024, the average price of the company's nylon slices was 13,543 yuan/ton, up 11.02% year on year, and the average price of caprolactam was 11903 yuan/ton, up 10.38% year on year. The price difference was 1,283 yuan/ton, up 17.50% year on year. Benefiting from the widening price spread, the company achieved net profit of 70 million yuan, a year-on-year increase of about 580 yuan/ton per ton. Q1 gross margin was 7.94%, up 0.35pct year on year, net margin was 5.01%, up 0.94pct year on year.
Demand is growing steadily, and industry concentration is gradually increasing
According to Baichuan News, in 2017-2023, China's apparent consumption of PA6 slices increased from 2.94 million tons to 4.35 million tons. The compound annual growth rate was 6.74%, and demand grew steadily. Currently, domestic nylon 6 slices are mainly used in nylon fibers, engineering plastics and films. According to Baichuan Information, the three major fields account for 70%, 17%, and 8% respectively. Nylon fiber is the main reason for the increase in demand for nylon in the past. At the same time, with the increase in personalized demand for outdoor sports, etc., there is huge room for future market growth for downstream civilian fiber application products. At the same time, compared with overseas countries, Western Europe, the United States, Japan and other countries all accounted for more than 50% of the consumption of engineering plastics and films in 2016. With the rapid development of the automobile industry and high-speed railways and the acceleration of the localization process of their components and the further popularization of nylon film, the consumption of nylon 6 engineering plastics and films is expected to increase dramatically. In recent years, under fierce industry competition, other enterprises have gradually withdrawn from the market, and industry concentration has gradually increased. The company's production technology and product performance are at a high level. Compared with high-end imported products, it is also a first-level enterprise in the nylon 6 slicing industry. It is the industry leader in product quality and cost control to ensure the company's steady development.
Production capacity continues to expand and product structure is continuously optimized
The company currently has a PA6 production capacity of 510,000 tons, and plans are abundant. The Hangzhou headquarters is expanding new nylon materials. The products include modified PA6, copolymerized PA, special PA, etc., and the second phase is expected to be put into operation by 2024; Tengzhou has prepared a subsidiary Polymerization Shunluhua to produce 400,000 tons of new PA6 materials per year. The first phase of the project, 180,000 tons, is expected to be put into operation in 2023, and 220,000 tons of the second phase is expected to be put into operation in 2026. The first phase of 80,000-ton PA66 in the Zibo plant in Jushun, Shandong is being actively promoted. It is expected to be put into operation in 2025, and the company's ongoing construction projects will reach 297 million yuan by the end of the first quarter of 2024. With the gradual implementation of the above projects, the company's production capacity will increase in the next few years, forming a larger scale advantage, which can meet the various needs of the market and customers. It is expected that the market share will further increase, and the advantages of scale will become prominent. Upstream in the industrial chain, the company's Tengzhou project cooperated with upstream Lunan (Yankuang Group) caprolactam and joined forces to open up the industrial chain layout. Along with the increase in the company's production capacity, optimization of product structure, and upstream layout of the industry, the company's profitability and scale are expected to increase rapidly.
Profit forecast and valuation: The company's net profit for 2024-2026 is estimated to be 2.77, 3.64 billion yuan, and 533 million yuan, respectively, EPS 0.88, 1.15, and 1.69 yuan, respectively, and the corresponding PE is 12.6X, 9.6X, and 6.5X, respectively, maintaining a “buy” rating.
Risk warning: Risk of raw material price fluctuations (the company's main raw material is caprolactam, which is a petrochemical or coal chemical derivative. Its price is affected by various factors such as national industrial policy, changes in market supply and demand, and changes in petroleum prices. Large fluctuations in caprolactam prices in the short term may cause the company's inventory management, procurement arrangements and product price adjustments to not effectively reduce or absorb the impact of raw material price fluctuations, which in turn affects business performance); downstream demand falls short of expectations (macroeconomic fluctuations will affect downstream demand for PA6. If demand falls short of expectations, it may lead to product prices and Profit decline, which in turn affects the company's profit); industry competition intensifies (if the company cannot continue to innovate in the functional characteristics of products, maintain high product quality and good market reputation, or if the overall production capacity of the industry increases dramatically and oversupply forms vicious competition, it is difficult to maintain steady sales growth and continuous increase in market share, thereby affecting the company's operating performance); project commissioning falls short of expectations (if production capacity falls short of expectations, it will affect the company's product production and sales, which in turn affects business performance), etc.