Key points of investment:
The company released its 2023 annual report: During the reporting period, the company achieved revenue of 2,114 billion yuan (YoY -13%), net profit attributable to mother of 367 million yuan (YoY -34%), net profit deducted from non-return to mother of 307 million yuan (YoY -42%), gross sales margin of 28.79% (YOY-6.45pct), and a net profit margin of 19.32% (YoY-5.78pct). Among them, 23Q4 achieved revenue of 549 million yuan (YoY -9%, QoQ +3%), realized net profit of 53 million yuan (YoY -22%, QoQ -27%), and realized net profit of 51 million yuan (YoY -12%, QoQ -4%) in a single quarter. The results were in line with the rapid performance report. The company's performance declined significantly year-on-year in 2023. The main reasons are: 1) sales of the company's long-chain diacid series products declined due to factors such as the international market environment and industry; 2) overseas market promotion fell short of expectations after sebacic acid was put into production; 3) the bio-based polyamide series was still undeveloped during the commercialization and promotion phase, and increased R&D investment dragged down performance. In 2023, the company plans to distribute a cash dividend of 1.90 yuan (tax included) to all shareholders for every 10 shares. Cash dividends account for 38.73% of net profit to mother this year.
The company released its 2024 quarterly report: During the reporting period, the company achieved revenue of 685 million yuan (YoY +35%, QoQ +25%), net profit attributable to mother of 105 million yuan (YoY +83%, QoQ +100%), and realized net profit of 103 million yuan (YoY +125%, QoQ +103%). The performance was at the center of the forecast. 24Q1's gross sales margin was 28.68%, with year-on-month changes of -5.35pct and -1.02pct, net sales profit margin of 15.61%, and +1.39pct and +5.55pct year-on-month respectively. At the same time, expenses remained basically normal. 24Q1 performance improved significantly from month to month, mainly due to a recovery in demand for long-chain binary acid series products, while the company seized the opportunity to change sales strategies and increase sales promotion efforts.
Downstream demand for long-chain dibasic acids picked up, sebacic acid substitution continued, and 24Q1 performance increased significantly from month to month. In 2023, due to factors such as the international market environment and industry, especially the decline in sales in the European market, the company's sales of long-chain dibasic acid fell short of expectations. According to the company's 2023 report data, during the reporting period, the company's long-chain binary acid series (containing sebacic acid) produced 65,700 tons (YoY +11%), achieved revenue of 1,908 million yuan (YoY -9%), gross profit margin 37.86% (YoY -2.83pct); bio-based polyamide series produced 103,000 tons (YoY -49%), with sales volume 0.76 million tons (YoY -31%), achieving revenue of 154 million yuan (YoY -33%) 17.99% (YOY-10.65pct). By region, domestic revenue of 1,373 billion yuan (YoY +9%), gross profit margin of 30.71% (YoY-5.75pct); overseas revenue of 694 million yuan (YoY -35%), gross profit margin of 40.05% (YoY+4.47pct). Since 2024, downstream demand has continued to pick up. The company has seized market opportunities, increased product sales, and made every effort to expand the new product sebacic acid market and increase customer share. The product is gradually replicating the company's chemical substitution process for lauric acid. The rapid recovery of the long-chain dibasic acid business has led to a significant increase in performance over the same period last year. Furthermore, the company is promoting the industrialization of bio-based long-chain binary acids using fatty acids to replace alkanes as raw materials.
Continue to promote bio-based polyamide application development, join hands with China Merchants Group and other companies to strengthen market promotion, and open up new growth space with collaborative development.
In 2023, the company announced a fixed increase plan. It plans to issue shares to Shanghai Yaoqin (to be established) to raise no more than 6.6 billion yuan. China Merchants Group is expected to indirectly hold more than 5% of the company's shares through Shanghai Yaoqin. At the same time, the company and China Merchants Group signed a “Business Cooperation Agreement”. According to the agreement, the amount of bio-based polyamide resin purchased and used by China Merchants Biotech in 2023-2025 was not less than 1, 800, and 200,000 tons, respectively. Combining the company's bio-based materials with China Merchants Bureau's resource endowments, they have jointly developed bio-based polyamide fiber compounding, pultrusion processes, and application technologies in the fields of containers, construction, photovoltaics, logistics, etc., to achieve “plastic instead of steel, plastic instead of aluminum, and thermoplastic instead of heat fixing”. In January 2024, the company signed a joint venture agreement with Korea's 3P.COM, which has rich simulation expertise and experience, to develop applications of thermoplastic bio-based polyamide composites, including hydrogen storage and transportation, urban air traffic, and wind power blades. In terms of new products, in 2023, the company completed verification of the 10,000-ton scale process for producing lactic acid from straw, completed a pilot test and began 10,000-ton industrialization. At the same time, it also has layout plans for biological fermentation of peptides, etc., laying a deep foundation for subsequent continuous growth.
Investment analysis: Considering that it will still take time to implement the commercial application of the company's bio-based polyamide composites, the company's 2024-2025 net profit forecast was lowered to 5.25, 709 million yuan (original value was 592 million yuan, 917 million yuan), and the net profit forecast for 2026 was 973 million yuan. The current market value corresponds to PE of 55, 41, and 29X. In the future, with the investment of China Merchants Bureau, the company's performance growth rate is expected to increase by 36%.
Risk warning: 1) Risk of uncertainty about new project construction progress, product delivery progress and sales; 2) risk of core technology leakage, loss of technical personnel, and delays in technology research and development; 3) risk of large fluctuations in raw materials and energy prices.