Incidents:
On April 30, 2024, Sinochem International released its 2023 annual report and 2024 quarterly report: achieved operating income of 54.272 billion yuan in 2023, a year-on-year decrease of 37.94%; realized net profit attributable to mother -1,848 billion yuan, or 1,311 billion yuan in 2022; realized net profit without return to mother of 2.342 billion yuan, or 833 million yuan in 2022; gross sales margin of 4.7%, a decrease of 4.0 pcts year on year; operating Net cash flow from activities was $1,705 million, or -49.9% YoY.
In the 2023Q4 quarter, the company achieved operating income of 112.59 yuan, -47.7% YoY, -19.5%; realized net profit to mother of -1,308 million yuan, 2022Q4 was 121 million yuan, and 2023Q3 was -376 million yuan; net profit after deduction of non-return to mother was 1,359 million yuan; and net cash flow from operating activities was -0.7 billion yuan. Gross sales margin was 2.46%, -3.7 pct year on year, -1.3 pct month on month; net sales margin was -12.09%, down 12.8 pct year on year and 9.5 pct month on month.
With 2024Q1, the company achieved revenue of 11.617 billion yuan, or -21.33% year-on-year, achieving net profit attributable to mother of 286 million yuan, 2023Q1 of 113 million yuan, and 2024Q1 achieving net profit without deduction to mother of 341 million yuan.
Investment highlights:
Driven by the decline in natural rubber exports and product prices, net profit to the mother in 2023 was pressured to achieve operating income of 54.272 billion yuan, a year-on-year decrease of 33.177 billion yuan. Excluding the impact of natural rubber sales, a year-on-year decrease of 16.190 billion yuan, a year-on-year decrease of 23.35%; realized net profit of 1,848 billion yuan in 2022, or 3.158 billion yuan year-on-year. In 2023, the company achieved gross profit of 2,538 billion yuan, year-on-year -5031 yuan, management expenses of 1,685 million yuan, year-on-year -511 million yuan, income tax of 283 million yuan, year-on-year -712 million yuan, and minority shareholders' profit and loss of -0.05 billion yuan, year-on-year.
By sector, in 2023, the company's basic raw materials and intermediate products achieved revenue of 7.830 billion yuan, -4.38% year-on-year, gross profit margin -1.92%, year-on-year -24.74pct. The gross margin pressure was mainly due to poor downstream demand, poor downward cost transmission, and product decline was higher than the decline in raw materials; the high-performance materials business achieved revenue of 7.0 billion yuan, +10.80% year-on-year, with a gross profit margin of 5.11%, year-on-year, -8.23 pct, mainly due to slow recovery in terminal demand, continuous increase in new production capacity, and product profit space being squeezed; Additive products achieved revenue of 4.316 billion yuan, a gross profit margin of 29.65%, and -9.20 pct, mainly due to the sharp decline in product market prices; chemical materials marketing achieved revenue of 17.375 billion yuan, -18.23%, gross profit margin of 2.63%, year-on-year -1.23 pct; other businesses achieved revenue of 17.774 billion yuan, -61.48% year-on-year, gross profit margin of 3.35%, year-on-year -0.67 pct.
In terms of period expenses, the company's sales expenses rate in 2023 was 1.08%, +0.29 pct year on year, and the management expense ratio was 3.11%, +0.59 pct; R&D expenses ratio was 1.63%, +0.49pct year on year; financial expenses ratio was 0.96%, +0.23 pct year on year.
2023Q4 achieved net profit to mother of -1,308 million yuan, -932 million yuan month-on-month, gross profit of 277 million yuan, -255 million yuan month-on-month, asset impairment losses of 771 million yuan, and -738 million yuan month-on-month.
Net profit from 2024Q1 improved month-on-month, and profit quality improved markedly in 2024Q1. The company achieved revenue of 11.617 billion yuan, -21.33% year-on-year, and +3.18% month-on-month; realized net profit of -286 million yuan, year-on-year - 360 million yuan, and +1,022 million yuan month-on-month.
With 2024Q1, the company achieved gross profit of 424 million yuan, +148 million yuan, management expenses of 326 million yuan, a month-on-month decrease of 211 million yuan, sales expenses of 112 million yuan, a year-on-month decrease of 81 million yuan, financial expenses of 147 million yuan, an increase of 54 million yuan, other income of 104 million yuan, an increase of 44 million yuan, asset impairment losses of -41 million yuan, and a month-on-month decrease of 730 million yuan in losses.
In the first quarter of 2024, new production capacity continued to be invested in the chemical industry, and market demand continued to be weak. The market for the company's key products was still sluggish in the first quarter, and most products fell compared to the same period last year. Through strengthened assessments and multiple measures, 2024Q1 achieved net cash flow of 248 million yuan from operating activities, +80.09% over the same period last year, and a significant improvement in profit quality.
The company is actively promoting key strategic projects. It is expected that multiple projects will be put into operation in 2024. The company's 240,000 tons/year BPA expansion project, 600,000 tons/year PDH, and 400,000 tons/year PO project will be successfully put into operation one after another, and the company will achieve full access to the carbon 3 industry chain project. Up to now, the carbon 3 industry chain project is in a period of integrated production capacity climbing, and various production facilities are operating steadily. In the polymer additive industry chain, the company's accelerator project completed all design and procurement work within 2023, and completed all single handover. Up to now, the accelerator project has the conditions for trial production, and it is expected to be put into actual testing in the second half of 2024. In the aramid industry chain, the company's 2,500 tons/year aramid production expansion project progressed smoothly according to the plan, and is expected to be put into trial in the fourth quarter of 2024.
The profit forecast and investment rating take into account the company's price and price spread. The company's 2024-2026 revenue is expected to be 532.08 billion yuan, 596.04 billion yuan, and 61,179 million yuan respectively, and the net profit to mother is 38,734, and 964 million yuan respectively. The current stock price corresponds to 38, 20, and 15 times PE, respectively. The company's carbon 3 industry chain has been fully completed, and the polymer additive industry chain and aramid industry chain are expected to be tested within 2024. Considering the company's future growth, the rating will be raised to “buy”.
Risks suggest that the progress of new production capacity construction falls short of expectations, the contribution performance of new production capacity falls short of expectations, fluctuations in raw material prices, changes in environmental protection policies, and a sharp decline in the economy.