Incident 1: Sinoma Technology released its 2023 annual report. In 2023, the company achieved revenue/net profit/net profit deducted to mother of 259/22/2 billion yuan respectively, +0.3%/-38%/-11% compared with the same period last year. In 23Q4, the company achieved revenue/net profit/net profit after deducting non-net profit of 77/52/ 4.7 billion yuan, respectively, or -4%/-16% compared with the same period last year. The company plans to pay a cash dividend of 940 million yuan, with a dividend rate of 42%, +11pcts year-on-year.
Incident 2: Sinoma Technology released its 2024 quarterly report. 24Q1, the company achieved revenue/net profit attributable to mother/net profit of 44/2.2/110 million yuan respectively, or -12%/-48%/-71% compared with the same period last year.
Comment:
The profitability of the wind turbine blade business improved, benefiting from falling raw material prices.
In 2023, the company's wind power blade business achieved revenue of 9.5 billion yuan, -1% year over year; sales volume was 21.6 GW, +5%; wind power tender prices were low, but the upstream raw material prices in the wind power manufacturing industry chain fell, and the profitability of enterprises in the industry increased. The company's gross profit margin for wind power business in '23 was 18.3%, +9.7 pcts year on year. In 2023, Sinoma Leaf completed the acquisition of 100% of the shares of Zhongfu Lianzhong. Zhongfu Lianzhong became a wholly-owned subsidiary of Sinoma Blade and carried out full internal integration. Many indicators such as gross profit margin and return on net assets were improved compared to the same caliber before integration.
The sales volume of the glass fiber business was +17% year over year, and profitability was dragged down by the downturn in the boom.
In 2023, the company's glass fiber business achieved revenue of 8.4 billion yuan, or -8%; of these, sales volume was 1.36 million tons, and domestic glass fiber yarn production was 7.23 million tons, +5.2% year-on-year, further increasing the company's market share; achieving a gross profit ratio of 22.6%, -9.8pcts year on year, achieving net profit of 1 billion yuan, or -64% year over year, mainly due to the declining prosperity of the glass fiber industry and the continuous decline in prices. In 2023, the company continued to optimize the sales product structure and increase the share of high-end products such as wind power and thermoplastic products. Wind power product sales were +37% year over year, and thermoplastic product sales were +23% year over year; it insisted on maximizing the export market and export sales volume was +8.4% year over year, hedging the performance pressure brought about by declining prices to a certain extent.
The lithium film business is growing rapidly, and production capacity will increase by 50% in 2024.
In 2023, the company's lithium battery separator business achieved revenue of 2.4 billion yuan, +31% year over year; sales volume was 1.73 billion square meters, +53% year over year; achieved gross profit margin of 38.5%, -1.6 pcts year on year; realized net profit of 740 million yuan, +54% year over year. In 2023, the company actively responded to the downward pressure on industry prices, continued to improve the domestic market, stabilize cooperation with leading companies in the battery industry, and increase supply share; increased the development of international markets, carried out strategic cooperation and customized product development with international customers, and sales increased significantly year-on-year; continuously improved the product structure. Sales of coated products increased 145% over the previous year, and the sales share increased by 12 percentage points. In terms of production quality, in 2023, the company's base film capacity utilization rate reached 107%; the annual production line A yield remained stable at over 90%; the base film unit cost decreased by 24% year on year, stabilizing the product gross margin level. In terms of capacity construction, by the end of 2023, the company had a production capacity of 4 billion square meters of base film, and production capacity is expected to exceed 6 billion square meters by mid-2024.
Revenue from the gas cylinder business continued to grow, and sales declined slightly.
In 2023, the company's high-pressure gas cylinder business achieved revenue of 1.36 billion yuan, and achieved sales of 215,000 high-pressure composite gas cylinders, -3% year-on-year; achieved sales of 383,000 industrial gas cylinders, or -3% year-on-year.
Profit forecast, valuation and rating: In 2023, Sinoma Technology's wind power blade business revenue increased slightly year on year, and profitability improved markedly year over year. The glass fiber business was dragged down by the decline in industry sentiment, the revenue scale of the lithium film business declined year on year. The revenue and sales volume of the lithium film business increased high, and the production capacity scale will expand further. Considering that the decline in product prices in the glass fiber industry has had a big impact on the company's profit level, we adjusted the company's net profit forecast for 2024-2025 to 2.47 billion yuan (40% reduction) and 2.88 billion yuan (44% reduction), and added the 2026 net profit forecast of 3.35 billion yuan. The current price corresponds to the company's 2024 dynamic price-earnings ratio of 11x, maintaining a “buy” rating.
Risk warning: the risk of a sharp rise in the price of upstream raw materials, the risk that downstream demand falls short of expectations, the risk that the company's new capacity investment will fall short of expectations, and the risk of a sharp reduction in product prices due to the deterioration of the competitive landscape in the industry.