Core views

Yonghe Co., Ltd. achieved revenue of 1,012 billion yuan in Q1 of 2024, an increase of 7.84% year on year; realized net profit of 37 million yuan, an increase of 27.38% year on year; realized net profit of 37 million yuan after deduction, an increase of 57.11% year on year. For the full year of '23, the company's revenue/net profit attributable to mothers/net profit after deduction was RMB 43.69/1.84/113 million yuan, respectively, with year-on-year changes of +14.86%/-38.81%/-57.82%, respectively. The company focuses on fluorine-containing polymer materials and environmentally friendly fluorocarbon chemicals. The scale advantage is remarkable, and construction and planning projects are progressing steadily; the products meet EU environmental standards, and the sales channel is global.

occurrences

The company released its 2024 quarterly report: Q1 2024 achieved revenue of 1,012 billion yuan, up 7.84% year on year; realized net profit of 37 million yuan, up 27.38% year on year; realized net profit after deduction of 37 million yuan, up 57.11% year on year.

The company released its 2023 annual report: The company's revenue/net profit to mother/net profit after deduction for the full year of '23 was 43.69/1.84/113 million yuan, respectively, with year-on-year changes of +14.86%/-38.81%/-57.82%, respectively.

Brief review

Net profit increased year-on-year in Q1 in '24, and the scale of production and sales gradually expanded

The company achieved revenue of 1,012 billion yuan in 24Q1, an increase of 7.84% year on year; achieved net profit of 37 million yuan, an increase of 27.38% year on year; realized net profit of 37 million yuan after deduction, an increase of 57.11% year on year. The increase in net profit is mainly due to the production of third-generation refrigerants according to quotas starting in 2024. Product sales prices have risen, and gross margin has increased.

For the full year of '23, the company's revenue/net profit attributable to mothers/net profit after deduction was RMB 43.69/1.84/113 million yuan, respectively, with year-on-year changes of +14.86%/-38.81%/-57.82%, respectively. The increase in revenue was mainly driven by the gradual completion and production of the company's new production facilities, and the continuous expansion of the scale of production and sales.

By product, in 2023, the company's fluorocarbon chemicals/fluoropolymer materials/chemical raw materials achieved revenue of 23.58/13.47/546 billion yuan, a year-on-year change of -3.75%/+58.66%/+33.11%; achieved a production volume of 20.34/3.87/44,800 tons, a year-on-year change of +10.53%/+113.91%/+107.22%; achieved sales volume of 11.35/2.75/214,000 tons respectively, a year-on-year change of +18.71% /+ 163.20%/+114.67%. The increase in revenue of fluoropolymer materials was mainly due to the successive commissioning of new HFP and FEP installations in Inner Mongolia, as well as the expansion of HFP and VDF installations in Inner Mongolia; the increase in chemical raw material revenue was mainly due to the completion and operation of Shao Wuyong's calcium chloride plant, and Huichangyong's methane chloride sales business included in the consolidated report from 2023.

Focusing on fluoropolymer materials and environmentally friendly fluorocarbon chemicals, the company has independent fluorite resources (3 mining rights, 2 prospecting rights), an annual production capacity of 135,000 tons of anhydrous hydrofluoric acid, a total annual production capacity of 197,000 tons of methane chloride and methylene chloride, 190,000 tons of fluorocarbon chemicals, and an annual production capacity of 67,800 tons of fluorocarbon polymer materials and monomers, leading domestic production capacity in terms of main product quality and production capacity; the company headquarters and Inner Mongolia Yonghe have annual mixing, assembly and distribution Production capacity of 720,000 tons of single refrigerants and mixed refrigerants.

At the same time, the company's production capacity includes 80,000 tons/year of hydrofluoric acid, more than 40,000 tons/year of fluorinated polymer materials, and 43,000 tons/year of fourth-generation refrigerants. In 2023, Shao Wuyong and 10,000 tons/year HFP, 0.75 million tons/year FEP, 10,000 tons/year PTFE, 0.05 million tons/year PVDF, 30,000 tons/year HFPO, Inner Mongolia Yonghe 70,000 tons/year VDF, etc. were successfully put into trial production; Shao Wuyong successfully put into operation 30,000 tons/year of methylene chloride and 60,000 tons/year of calcium chloride.

Focus on technological development to support the long-term development of the company

The company has always placed R&D innovation at the core of overall development, focusing on key areas such as the development of new fluorine materials, energy saving and resource recycling, and continuously promoting R&D reserve project work on the basis of rich development of the original core technology; strengthening R&D, production and marketing integration and cross-departmental communication and coordination mechanisms, and focusing on the effective connection of R&D results with market needs, so as to achieve market-centered, technology-supported, and efficiency as the goal to improve product profitability. During the reporting period, the company successfully industrialized PPVE and HFPO, and carried out development of hexafluoropropane oligomers and derivatives, synthesis of catalytic monomers, research on fourth-generation refrigerants, PVDF development, and development of mixed environmentally friendly refrigerants. In 2023, the company added 5 new authorized patents, including 4 invention patents and 1 utility model.

Profit forecast and valuation: The company's net profit from 2024 to 2026 is estimated to be 60 billion yuan, 770 million yuan and 9.1 billion yuan, respectively; EPS is 1.58 yuan, 2.02 yuan and 2.40 yuan, respectively; PE is 16.0X, 12.5X, and 10.5X, respectively.

Risk warning: (1) Risk of cyclical fluctuations in the industry: Affected by many factors such as upstream raw material supply, downstream product market demand, product production capacity, and environmental protection policies, the fluorine chemical industry has experienced obvious cyclical changes in recent years. If the industry declines in the future due to cyclical fluctuations in the industry, the company's future profitability may be affected. (2) Risks of rising prices of important raw materials: In anticipation of carbon peaks and carbon neutrality policies, it is not ruled out that China will further introduce policies to reduce resource and energy consumption, compounding the intensification of geopolitical risks, triggering an increase in raw material and energy prices, thus having a certain impact on the company's business performance. (3) Technology development and new product substitution risk: If the company fails to keep up with the industry in product technology development when developing in the direction of scale, refinement, and serialization in the future, or if the company's fourth-generation refrigerant construction progress falls short of expectations or other alternative products appear, it may adversely affect the company's performance. (4) Industrial policy adjustment risk: The company is mainly engaged in the production and sale of fluorine chemical products, and changes in national industrial policy will affect the company's production and operation. If China adjusts its HFCs reduction plan in the future, it may adversely affect the company's production and operation.