Description of the event

The company released its report for the first quarter of 2024. In the first quarter of 2024, it achieved operating income of 1,487 million yuan, a year-on-year decrease of 5.64%; net profit to mother was 51 million yuan, a year-on-year decrease of 65.05%; and net cash flow from operating activities was 27 million yuan, a year-on-year decrease of 72.94%.

Incident comments

2024Q1 performance improved month-on-month, with a significant year-over-year decline. There are two main reasons for 2024Q1's net profit to its mother: the first is the year-on-year reduction in government support funds; the second is the year-on-year parking and maintenance of some installations. Among them, the EVA device was parked for 6 days, the EO device was parked for 12 days due to catalyst replacement, and the EOD device stopped at the same time, which affected product production. Management costs also increased year-on-year. All of the above devices have resumed normal production. In 2024, the company will also launch a number of new installations one after another, and the range of high-margin products will further increase.

Demand for EVA continues to grow steadily, and there is plenty of room for future growth. According to data from the China Photovoltaic Industry Association, in 2023, China added 216.9 GW of PV installed capacity, up 152.0% year on year; module export volume was 208.1 GW, up 34.5% year on year.

According to Bloomberg New Energy's financial report, the world's new installed capacity will reach 444 GW in 2023, an increase of 76.2% over the previous year; the number of new global PV installations will reach 627 GW in 2025. According to Zhuochuang information, China's EVA production in 2023 was 2.154 million tons, with an apparent consumption of 3.339 million tons, an increase of 20.8% over the previous year, and import dependency was 41.7%. Over the next five years, total EVA demand is expected to grow at a compound rate of 9.2%, and total EVA demand will reach 5.55 million tons by 2028.

The company's new EVA production capacity is about to be implemented, and POE will be deployed in the future. The company's EVA products currently have a production capacity of more than 150,000 tons/year. The device uses ExxonMobil kettle process technology, with a production capacity of 200,000 tons/year. It is planned to be put into operation in 2025. The device uses LyondellBasell tubular process technology. Both sets of plants mainly produce products such as photovoltaic film materials with high added value. After 2025, the company's EVA production capacity will exceed 350,000 tons/year. The company actively lays out the POE business, plans to build a 300,000 tons/year POE project, and produces a series of high-end olefin material products such as POE photovoltaic film materials and toughening materials. In the future, the company will also have two mainstream photovoltaic film products, EVA and POE, to further enrich the company's layout in the field of photovoltaic materials and enhance its core competitive advantage.

The company has broad room for future growth. 1. In the field of new energy: 1) The company's 200,000 tons/year EVA production capacity is expected to be put into operation in 2025; 2) The 90,000 tons/year VA unit has successfully operated at full load in January 2024, and the EVA device has achieved complete self-supply of raw materials; 3) Actively lay out the POE business and plan to build 300,000 tons/year POE projects, including the first phase of 100,000 tons/year and 200,000 tons/year in the second phase to produce a series of high-end olefin material products such as POE photovoltaic films and tougheners. The first phase of the project is expected to be completed in 2025 Put into operation; 4) The company's 20,000 tons/year ultra-high molecular weight polyethylene plant was put into trial operation at the end of March 2024, and the 4,000 tons/year VC unit for the lithium battery additive project is scheduled to be completed and put into operation in 2024. 2. In the field of biodegradable materials: 1) The 130,000 tons/year PLA project under construction by the company is scheduled to be completed and put into operation in the first half of 2024; 2) The 50,000 tons/year PPC plant under construction is scheduled to be completed and put into operation in 2025; 3. In the field of special fine materials: The 10,000 tons/year electronic special gas project under construction is scheduled to be completed and put into operation in the first half of 2024.

Without considering future share capital expansion, the company's net profit for 2024-2026 is estimated to be 410 million yuan, 610 million yuan, and 850 million yuan. The PE corresponding to the closing price on April 26, 2024 is 52.7 times, 35.7 times, and 25.8 times, maintaining a “buy” rating.

Risk warning

1. EVA's boom falls short of expectations; 2. The construction progress of the project falls short of expectations.