Incidents:
The company released its 2023 annual report and 2024 quarterly report. In 2023, the company achieved operating income of 1.1 billion yuan, an increase of 195% over the previous year; net profit to mother was 140 million yuan, an increase of 5,500% year on year.
In the first quarter of 2024, the company achieved operating income of 300 million yuan, a year-on-year increase of 24% and a month-on-month increase of 4%; realized net profit to mother of 121 million yuan, a year-on-year decrease of 43% and an increase of 818% over the previous year.
Due to the discontinuation of production and maintenance and the slump in the catalyst business, the performance was slightly lower than expected. The main reason was that the comprehensive utilization project for petroleum coke hydrogen ash successfully completed production, and treatment and disposal service fees and sales revenue from recycled products increased dramatically. However, the company's catalyst business had a certain impact on overall performance due to lower product sales unit prices and waste treatment and disposal unit prices, as well as a sharp increase in depreciation costs after the new project was implemented.
2024Q1's revenue reached a new high in a single quarter, but net profit declined significantly year over year. Sales of resourced products increased after the new catalyst project was put into operation, but competition in the industry was intense. The decline in sales unit prices and expenses such as depreciation expenses and labor costs after operation of the new project increased sharply year-on-year, eroding profits, and due to the impact of stoppages and maintenance, the company's overall costs and expenses increased.
Deeply cultivate technological innovation, and the industrialization of waste plastic projects is progressing in an orderly manner
The company is a technology enterprise, driven by R&D. At present, industrial production of flue gas removal and denitrification and chemical regeneration of waste sulfuric acid has been achieved, and the “deep catalytic cracking of waste plastics mixed with circulating fluidized beds to produce chemical raw materials (CPDC) technology” has also obtained a feasibility certification from the China Petrochemical Federation expert group in 2023.
The company is also actively promoting the construction of an exemplary project for the comprehensive utilization of 200,000 tons/year mixed waste plastics, and is laying out waste plastic recycling in many companies across the country. The company's many projects have proposed innovative solutions to industry pain points in related fields, and have high commercial value.
Profit Forecasts, Valuations, and Ratings
We expect the company's revenue for 2024-2026 to be 15/25/3.3 billion yuan, respectively, with corresponding growth rates of 42%/66%/31%, respectively, net profit to mother of 2.5/4.4/590 million yuan, EPS of 1.76/3.16/4.25 yuan, and 3-year CAGR of 62%. Since the company's multiple technologies have solved related industry pain points, and the mixed waste plastic project may be the first in the world and there is more space, we will give the company 40 times PE in 24 years, corresponding to a target price of 70.2 yuan to maintain “purchase” ratings.
Risk warning: Industrialization projects fall short of expectations, FCC catalyst business continues to prosper