Luxi Chemical announced its 2023 annual report. In 2023, the company achieved operating income of 25.358 billion yuan, a year-on-year decrease of 16.47%, and net profit to mother of 819 million yuan, a year-on-year decrease of 74.05%.
The main reason for the decline in performance in 2023 was lower product market prices, lower operating rates, and the discontinuation of production of hydrogen peroxide devices due to accidents. 1) By product, the sales volume of octanol, nylon 6 chips, and caustic soda in 2023 was 45.89, 29.76, and 662,400 tons, respectively, down 5.75%, 5.49%, and 18.18%, respectively. Revenue was 43.89, 35.17, and 533 million yuan, respectively, down 5.48%, 9.95%, and 34.49% year-on-year respectively. The average prices were 9565, 11816, and 805 yuan/ton, respectively, with year-on-year changes of 0.30%, -4.71%, and -19.93%, respectively. 2) The three cost rates in 2023 were 3.53%, up 0.63 percentage points from the previous year. The sales expense ratio, management expense ratio, and financial expense ratio were 0.19%, 2.35%, and 0.99%, respectively, up 0.00, 0.43, and 0.20 percentage points from the previous year, and the R&D expenses rate was 3.68%, up 0.42 percentage points from the previous year. 3) The operating margin in 2023 was 4.47%, down 8.08 percentage points from the same period last year.
The company's main product production target in 2024 is to produce 9.6 million tons of products. 1) In terms of capacity utilization, the capacity utilization rates of the company's main products caprolactam, nylon 6, silicone and formic acid in 2023 were 78.95%, 74.67%, 100.42%, and 84.16%, respectively. 2) In terms of output, the chemical manufacturing industry produced 4.44,800 tons in 2023, down 11.00% year on year, and the fertilizer manufacturing industry produced 1.4059 million tons, up 0.24% year on year. 3) The company's main product production target in 2024: to produce 9.6 million tons of products (including the internal portion for mutual use as raw materials).
The company is actively promoting project construction, and production capacity is expected to increase further. The company's projects under construction in 2023 include caprolactame-nylon 6 phase I project, silicone project, polycarbonate project, 240,000 tons/year ethylene downstream integration project (phase II project), 150,000 tons/year propionic acid project, and hydrogen peroxide project. By the end of 2023, the project progress was 85%, 75%, 98%, 38%, 35%, and 60%, respectively. The production capacity under construction includes 300,000 tons/year of caprolactam, 300,000 tons/year of silicone, and 135,000 tons/year of polycarbonate.
After years of development, the industrial chain integration within the park has obvious advantages. Production enterprises in the park implement intensive unified management, which has great advantages in cost control, energy saving and consumption reduction, comprehensive utilization of resources, and flexible adjustment of product structures.
Profit forecasts and reference ratings. We expect the company's EPS for 2024-2026 to be 1.00, 1.18, and 1.39 yuan respectively (the original 2024-25 forecast was 1.92 and 2.17 yuan). Referring to the valuation of comparable companies in the same industry, we think a reasonable valuation is 16 times PE in 2024 (originally 9x in 2023), corresponding to a target price of 16.00 yuan (+2%), maintaining the “superior to market” rating.
Risk warning. The progress of projects under construction fell short of expectations, and market prices for raw materials fluctuated.