Incident: The company released its 2023 annual report. During the reporting period, it achieved operating income of 27.260 billion yuan, and realized net profit of 3,576 billion yuan, or -43.14%. Among them, Q1/Q2/Q3/Q4 achieved net profit of 7.82/9.28/12.18/649 million yuan, respectively, -67.82%/-55.40%/+18.84% /-14.09.
Product production and sales increased year over year in 2023, but falling prices dragged down performance. In November 2023, the first phase of the Jingzhou project was completed and put into operation, adding a urea production capacity of 1 million tons/year, acetic acid production capacity of 1 million tons/year, DMF production capacity of 150,000 tons/year, mixed methylamine production capacity of 150,000 tons/year, and a high-end solvent project at the Dezhou base in December 2023, adding 300,000 tons/year of diethyl carbonate production capacity, and 50,000 tons/year of diethyl carbonate. According to the company's operating data announcement, the sales volume of fertiliser/organic amine series products/acetic acid and derivatives/new materials related products in 2023 was 325.97/52.16/71.54/2.1791 million tons, respectively, +14.89%/+8.80%/+24.20%/+20.20%, and the average sales price was 1741/5128/2868/7102 yuan/ton, respectively, -10.47%/-58.99%/-21.55%/-12.13%. By product, the average price of urea/acetic acid/adipic acid/DMF/isooctanol/dimethyl carbonate/caprolactam in 2023 was 2474/3496/9546/5643//10679/4562/12605 yuan/ton, respectively, -8.96%/-24.00%/-15.41%/-53.63%/-0.70%/-28.54%/-4.20%. Affected by this, the company's gross sales margin in 2023 was 20.85%, down 8.09ct year on year, and net sales margin was 13.29%, down 7.5 pct year on year.
The continuous cost reduction and flexible production of coal gasification platforms have made the company's performance both resilient and resilient. Under the extreme circumstances of the spread of the global pandemic in 2020, the company's performance showed strong resilience. After that, as the global economy recovered, the company's profits quickly recovered and rose sharply, showing strong elasticity at the height of the cycle. Although the company's performance declined due to weak demand in 2023 and the downturn in the industry, we are still optimistic about the company's future profitability and performance elasticity after the recuperation.
New construction projects ensure long-term growth. In 2023, the company's fixed asset investment reached 8.711 billion yuan, +24.98% year-on-year, and is in a period of rapid scale expansion. The high-end solvent project and the first phase of the Jingzhou base project were successfully put into operation in 2023. On March 29, 2023, the Jingzhou base launched a new batch of high-end chemical projects, and the Dezhou base nylon 66 project progressed as scheduled, which will guarantee the company's long-term growth.
Investment advice: We expect the company's net profit to be 48.38/70.99/9.265 billion yuan for 2024-2026, and EPS of 2.28/3.34/4.36 yuan, respectively, and the corresponding PE is 13/9/7 times, respectively. Considering that although the company is cyclical, cycle troughs are resilient, cycle highs are flexible, and at the same time grow, maintaining a “buy” rating.
Risk warning: Product prices have dropped sharply, and new projects have fallen short of expectations.