Description of the event
The company released its 2024 quarterly report, achieving operating income of 2.14 billion yuan (+5.1% YoY, -12.0%), realized net profit of 140 million yuan (+7.3% YoY, -55.3% YoY), and realized non-net profit of 130 million yuan (+23.0% YoY, -57.4% month-on-month).
Incident comments
Sales of phenolic resins and electronic chemicals increased year-on-year. The first quarter was a traditional low season for phenolic resins and furan resins. The company's profit margin remained stable. The gross sales margin and net profit margin of 2024Q1 were 22.9% and 6.6% respectively, -0.1 pct and +0.1 pct compared with 2023Q1. In terms of production and sales, 2024Q1 achieved sales of 115,000 tons, 35,000 tons, and 15,000 tons of phenolic resins, foundry resins, and electronic chemicals, respectively, of +14.1%, +1.0%, and +14.5% year-on-year, respectively. The phenolic resin market continues to expand, the load of new production lines has increased, and sales have increased dramatically; at the end of 2023, Zhuhai Shengquan special epoxy resin was put into production. PPO was in short supply and sales volume was impressive, and sales of electronic chemicals also increased considerably. It is expected that as the macroeconomy recovers and downstream infrastructure, wind power, electronics, automobiles, tires and other fields recover, demand for the company's products is expected to continue to rise, and the economy will recover.
The technical strength is strong, electronic materials are flourishing, and PPO production capacity is about to expand. The company has been in the field of electronic chemicals since 2005. After years of intensive cultivation, it has achieved localized replacement of electronic grade phenolic resins and special epoxy resins, and its market share is increasing year by year. In 2023, the company achieved mass production of high-frequency high-speed resin PPO, and the product supply is in short supply. The new kiloton production expansion line is expected to be completed and put into operation in 2024Q2. The company not only focuses on developing M6 and M7 level high-frequency high-speed resins, but is also gradually promoting the development and promotion of ultra-low loss materials such as M8 and M9. The company's specialty epoxy resin, electronic grade phenolic resin, photoresist and resin projects have all achieved breakthroughs to achieve commercial sales in the field of localized replacement or high-end applications; in addition, the company has launched a 1000 tons/year maleimide resin project and a 2000 tons/year hydrocarbon resin project. The electronic materials business has laid the foundation for the company's rapid sustainable development in the future.
Biomass projects continue to advance and are expected to improve efficiency. The company was involved in the biomass industry at the beginning of its establishment. The “Shengquan Law” biomass refining integration technology developed was selected into the National Development and Reform Commission's “Green Technology Promotion Catalogue”. This technology has systematically solved the global problem that the three components in straw are difficult to efficiently separate. The company's Daqing Integrated Biomass Refining Project (Phase I) was fully put into operation in May 2023, with an annual straw processing capacity of 500,000 tons, successfully achieving a leap from “process” to “industry”. It is expected that profits will improve as the project continues to advance.
Maintain a “buy” rating. The company is a leader in synthetic resins. Synthetic resins contribute steady profits, are rich in electronic chemicals and biomass chemicals, and are expected to open up room for growth. The 2024-2026 performance is expected to be 10.7, 13.4, and 1.6 billion yuan, maintaining a “buy” rating.
Risk warning
1. The risk that the project construction progress falls short of expectations;
2. Product competition increases risk.