Net profit for 23 years -23% /24Q1 -40% YoY. Maintaining the “Purchase” rating, the company published the 23 annual report and the quarterly report for 24 on April 29. Revenue for 23 years was -13% to 7.85 billion yuan, and net profit to the mother was 900 million yuan (before deducting 81 million yuan), -23% (after deducting -16%); of these, net profit to the mother for 23Q4 was 210 million yuan (not after deducting 130 million yuan), -48%/month-on-month +16% (not after year-on-year) 25%). The company plans to pay 0.346 yuan per share, corresponding to an annual dividend rate of 35.05%. 24Q1 revenue of 1.6 billion yuan, -22% YoY, net profit attributable to mother was 137 million yuan ($136 million after deduction), -40% YoY/-36% YoY (-40% YoY +1% after deduction). We expect the company's 24-26 net profit to be 10.6/12.5/1.54 billion yuan, corresponding to EPS of 1.16/1.37/1.69 yuan, which is comparable to the company's 24-year Wind consensus average of 25xPE. Considering the company's competitive advantage in the field of high-end materials, we will give 32xPE for 24 years, with a target price of 37.12 yuan, maintaining a “buy” rating.
The trend of fluorine-containing materials declined in '23, and maintained a high R&D investment throughout the year. The company's revenue for high-end manufacturing chemical materials was yoy -4.5% to 3.1 billion yuan. Relying on differentiated competitive advantages, the gross margin of the sector yoy was +5.3pct to 40.5%; the revenue of high-end fluorine materials was YOY -20% to 1.6 billion yuan, and gross margin yoy-7.4pct to 14.3%, mainly driven by the downward trend in fluoropolymers; the revenue of electronic chemicals yoy -5.8% to 660 million yuan, and the product boom in the sector was also under pressure, and the gross margin yoy- yoy- 3.7 pct to 23.5%; downstream applications and customers in the carbon emission reduction business continued to expand, helping the engineering technology service sector revenue yoy +11% to 1.8 billion yuan, and gross margin yoy+0.4 pct to 18.6%. The company's comprehensive gross profit margin for the full year of 23 was 26.7% (yoy+2.4pct), with a period cost ratio of yoy+2.8pct to 18.2%, of which the R&D expense ratio was YOY+1.0pct to 8.1%.
The 24Q1 fluoropolymer boom is still weak. The average sales price of PTFE resin/fluorine rubber/fluorine gas/polyurethane new materials/special coatings in a single quarter was YOY -8%/-26%/-18%/-4.6%/+19% to 3.4/8.4/9.0/2.2/49,000 yuan/ton, the average price of rubber sealing products YOY -20% to 17.3 yuan/piece, and the average price of specialty tires was still weak yoy +44% to 7824 yuan/piece, and the average price of most products was still weak year-on-year. The company's gross profit margin for the single quarter was 26.8% (yoy+3.5pct/qoq-6.3pct), and the period expense ratio was 17.6% (yoy+4.4pct/qoq-13.4pct).
New projects lead future growth, and the deepening reform of state-owned enterprises helped the value revaluation company ushered in the centralized release of many new projects in 23-25, including Haohua Gas 4,600 tons/year electronic gas, Zhonghao Chenguang 2,500 tons/year PVDF, Limingyuan 46,000 tons of special new materials, Chenguangyuan 26,000 tons of organic fluorine materials, Shuguangyuan 100,000 airliner tires, and Northwest China silicone sealing profiles, etc., which are expected to help a new round of growth. The company has long focused on shareholder returns. In addition to the 18-year business restructuring, the dividend rate for 12-23 was over 30%. With the incremental release of new projects and the injection of blue sky assets, profits are expected to rise again and help maintain good shareholder returns. As a new materials platform company under Sinochem of China, the company's long-term investment value is also expected to be highlighted in the context of deepening state-owned enterprise reform.
Risk warning: The progress of the new project falls short of expectations; competition for fluorine materials etc. intensifies; the restructuring progress falls short of expectations.