Incidents:
On April 26, 2024, Yonghe Co., Ltd. released its 2023 annual report and first quarter report: achieved operating income of 4.369 billion yuan in 2023, up 14.86% year on year; realized net profit of 184 million yuan, down 38.81% year on year; realized net profit withheld from mother was 113 million yuan, down 57.82% year on year; gross sales margin was 14.63%, down 3.83 pct year on year; net sales profit margin was 4.21%, down 3.69 pct year on year; net cash flow from operating activities was 524 million yuan, up year on year $0.82 billion.
In the 2023Q4 quarter, the company achieved operating income of 1,140 million yuan, +5.23% year over month; realized net profit of 0.2 billion yuan, -70.12% year on year, -58.44% month on month; net profit after deducting non-return to mother -38 million yuan, -155.04% year on year, -176.41% month on month; net cash flow from operating activities was 272 million yuan, +163 million yuan year on month. Gross sales margin was 11.49%, -10.03 pct year on year, -2.60 pct month on month; net sales margin was 1.90%, -4.79 pct year on year, -2.63 pct month on month.
At the same time, the company announced its first quarter report. In a single quarter of 2024Q1, the company achieved operating income of 1,012 million yuan, +7.84% year on month; realized net profit of 37 million yuan, +27.38% year on year, +72.12% month on month; net profit after deducted from mother was 37 million yuan, +0.13 billion yuan year on year, +74 million yuan month on month; net cash flow from operating activities was 13 million yuan, year on year +186 million yuan year on month, -259 million yuan month on month. Gross sales margin was 17.26%, +0.54 pct year on year, +5.78 pct month on month; net sales margin was 3.72%, +0.59 pct year on year, +1.82 pct month on month.
Investment highlights:
New devices are put into construction, and revenue increases in 2023
In 2023, we achieved operating revenue of 4.369 billion yuan, up 14.86% year on year, mainly due to the gradual completion and production of the company's newly built production facilities and continuous expansion of production and sales volume; net profit to mother was 184 million yuan, down 38.81% year on year, mainly due to the continuous downturn in product prices due to the structural mismatch between supply and demand in the fluorine chemical industry. Among them, in 2023, the company achieved gross profit of 639 million yuan, a year-on-year cost of 472 million yuan, a year-on-year cost of +126 million yuan, asset impairment losses of 19.22 million yuan, a year-on-year decrease of 1.17 million yuan, credit impairment losses of 954,000 yuan, and an increase of 3.39 million yuan year-on-year. The cash flow from the company's operating activities in 2023 was $524 million, +82 million yuan year-on-year. In terms of period expenses, the company's sales expenses rate in 2023 was 1.62%, +0.12pct year on year; management expenses rate was 5.96%, -0.18pct year on year; R&D expenses rate was 2.07%, +0.70pct year on year; financial expenses ratio was 1.17%, +1.07pct year on year.
In terms of products, in the fluorocarbon chemicals sector, the company achieved production volume of 203,400 tons, +10.53% year over year, achieved export sales volume of 113,500 tons, +18.71% year on year, and achieved operating income of 2,358 million yuan, -3.75% year on year; in the fluoropolymer materials sector, the company achieved production volume of 38,700 tons in 2023, +113.91% year on year, achieving export sales volume of 27,500 tons, +163.20% year on year; chemical raw materials sector, company In 2023, it achieved production volume of 448,800 tons, +107.22% year on year, achieved export sales volume of 21.14 million tons, +114.67% year over year, and achieved operating income of 546 million yuan, +33.11% year over year.
In 2023, Q4 achieved net profit of 21.63 million yuan, a year-on-month decrease of 30.43 million yuan, and realized gross profit of 131 million yuan, a month-on-month decrease of 131 million yuan, a year-on-month increase of 156 million yuan, an increase of 46.38 million yuan, income tax expenses of 16.48 million yuan, and an increase of 7.84 million yuan over the previous month.
Refrigerant prices rise, 2024Q1 performance improves
According to the company's first quarter results report, 2024Q1 achieved net profit of 37.65 million yuan, an increase of 16.02 million yuan over the previous month. 2024Q1 achieved gross profit of 175 million yuan, an increase of 44 million yuan over the previous month. The increase in profits was due to rising prices for third-generation refrigerants. In terms of expenses, the sales cost of 2024Q1 was 15.49 million yuan, a decrease of 3.51 million yuan; management expenses were 68.06 million yuan, a decrease of 18.21 million yuan; R&D expenses were 24.77 million yuan, a decrease of 2.11 million yuan; and financial expenses were 17.28 million yuan, a decrease of 6.56 million yuan. 2024Q1's asset impairment losses were 6.6 million yuan, up 18.89 million yuan from the previous month; credit impairment losses were -23,000 yuan, down 1.27 million yuan from the previous month.
Refrigerant quotas have been implemented, and the company's fluoropolymers are growing well
The company now has an annual production capacity of 190,000 tons of fluorocarbon chemicals. According to the 2024 HFCs production quota distribution announced by the Ministry of Ecology and Environment, the company received a quota of 55,200 tons of third-generation refrigerants, which is at the top of the industry; the company has an annual production capacity of 67,800 tons of fluoropolymer materials and monomers, of which HFP production capacity is at the forefront of the world, and leading domestic product technology, such as FEP, enjoys an important market position; the company has an annual production capacity of 642,000 tons of chemical raw materials. By the end of 2023, the company had an annual production capacity of 67,800 tons of fluorinated polymer materials and monomers, and a production capacity of more than 40,000 tons under construction.
Profit forecasts and investment ratings estimate that the company's 2024-2026 revenue will be 53.00, 60.17, and 6.539 billion yuan, and net profit to mother will be 510, 6.45, and 786 million yuan respectively, corresponding to 19, 15, and 12 times PE, respectively. Considering the company's future growth, it will maintain a “buy” rating.
Risks suggest falling product prices, progress in new production capacity construction falling short of expectations, new production capacity contributing to performance falling short of expectations, fluctuating raw material prices, changes in environmental protection policies, and a sharp decline in the economy.