Description of the event
The company released its 2023 annual report and 2024 quarterly report, achieving revenue of 25.358 billion yuan, and realized net profit of 819 million yuan, -74.05% year on year; 24Q1 achieved revenue of 6.752 billion yuan, +2.61% year on month, -8.94% month on month, and realized net profit to mother of 568 million yuan, +76.26% year on month, and +80.89% month on month.
Incident reviews
The company achieved revenue of 25.358 billion yuan, or -16.47% year on year, and realized net profit of 819 million yuan, or -74.05% year over year. The year-on-year decline was due, on the one hand, to a drop in the prices of the company's main products, and on the other hand, due to a decline in production and sales and an increase in non-operating expenses due to inspection and maintenance caused by the hydrogen peroxide accident. The company achieved revenue of 6.752 billion yuan in 24Q1, +2.61% year over month, and -8.94% month on month. The decline in revenue was mainly due to the low season of the Spring Festival. Net profit to mother was 568 million yuan, +76.26% year over year, and +80.89% month over month. The performance greatly exceeded market expectations, mainly due to a decline in raw materials such as coal and improved operating capacity.
The company's main product boom gradually repaired the decline in superimposed coal raw materials in 24Q1. According to Baichuan Yingfu, the price of n-butanol was 8,463 yuan/ton, +3% month-on-month; n-octanol was 1,1954 yuan/ton, the same month-on-month ratio; caprolactam was 13,474 yuan/ton, +4% month-on-month; PA6 was 14,482 yuan/ton, +4% month-on-month; PC was 15,483 yuan/ton, -2% month-on-month. In terms of raw materials, Qinhuangdao Q5500 thermal coal was 914 yuan/ton, -10% month-on-month; propylene was 6,790 yuan/ton, the same month-on-month; pure benzene was 8161 yuan/ton, +6% month-on-month.
The widening product spread contributed to an improvement in the company's gross margin. The 24Q1 gross margin was 18.38%, +3.47 pcts compared to the previous month.
China has raised import costs for propionic acid, and the company has fully benefited as a leading domestic propionic acid company. China's Ministry of Commerce announced the preliminary ruling on the anti-dumping investigation against imports of propionic acid originating in the United States. The investigation authorities initially determined that the investigated products had been dumped and that the domestic propionic acid industry had suffered material damage. The investigation authorities decided to implement temporary anti-dumping measures in the form of a security deposit. Starting April 20, 2024, import operators are required to pay an additional deposit to China Customs when importing propionic acid originating in the United States. The company's 150,000 ton propionic acid project is progressing steadily, which will benefit from changes in the propionic acid import policy. Furthermore, the company's caprolactam, nylon 6 phase I project, silicone and other projects are progressing smoothly according to plan, contributing to future growth.
Investment advice
As a leading comprehensive chemical enterprise in China, the company has industrial sectors such as new chemical materials, basic chemicals, fertilizers, and equipment manufacturing. The main products are caprolactam, nylon 6, silicone, formic acid, polyalcohols, methane chloride, methylamine, DMF, polycarbonates, etc. Based on the existing industrial base, the company has built an integrated industrial base for new chemical materials and fine chemicals according to the development model of low-carbon raw materials, industrial chain integration, high-end products, and industrial collaboration. Promote the completion and implementation of new projects. Projects such as methylamine/DMF renovation and expansion were put into operation as scheduled. The first phase of the caprolactame/nylon 6 project and silicone projects progressed smoothly. With the continuous recovery of future downstream demand and the expansion of projects under construction, the company is expected to continue to improve in performance. The estimated revenue for 2024-2026 is 302, 319.32.1 billion yuan, and net profit to mother is 19.49, 22.48 billion yuan, 2.04 billion yuan, EPS 1.01.17/1.31 yuan, respectively. Corresponding to the company's market capitalization of 22.94 billion yuan on May 6, PE was 11.8/10.2/9.2 times, respectively, with the first “buy-B” rating.
Risk warning
Risk of raw material price increases: Since the company's main raw materials are coal, acrylic, and pure benzene, if the price of raw materials such as coal rises sharply, it will have an impact on the profitability of the product.
The macroeconomic recovery falls short of expectations: Due to the company's rich product matrix, the downstream involves various industries such as textiles, agrochemicals, real estate, rubber and plastics, etc., which are highly correlated with the macroeconomy. If the economic recovery falls short of expectations, sales of the company's main products will be impacted.
Product price decline: The company's products, such as octanol, butanol, PA6, caprolactam, etc., will successively invest in additional production capacity this year, or have a certain impact on the market. If the prices of related major products fall, it will have an impact on the company's profits.
Safety and environmental risks: Some of the chemical products produced by the company are hazardous chemicals. There are certain safety and environmental risks in the production, storage, filling and transportation of products.