Description of the event

In 2023, the company achieved revenue of 3.33 billion yuan (-30.1% YoY), achieved attributable net profit of 280 million yuan (YoY -42.4%), and realized non-net profit of 210 million yuan (-53.6% YoY). Among them, Q4 achieved revenue of 720 million yuan in a single quarter (-27.7% YoY, -16.9% YoY), realized net profit of 42 million yuan (+74.5% YoY, -61.6% YoY), and realized non-net profit of 39 million yuan (+146.6% YoY, -11.7% YoY). With 2024Q1, the company achieved revenue of 960 million yuan (+23.3% YoY, +32.3%), realized net profit of 154 million yuan (+672.5% YoY, +270.8%), and realized non-net profit of 154 million yuan (YoY +610.6%, YoY +293.5%). In 2023, the company will pay a cash dividend of RMB 2.30 (tax included) for every 10 shares.

Incident comments

The overall average price of the company's refrigerant segment declined in 2023. In 2023, the fluorine refrigerants sector achieved operating revenue of 2.51 billion yuan (-31.0% year on year), achieved gross profit margin of 11.6% (-3.7 pct year on year), achieved export sales volume of 123,000 tons/year (-12.4% year over year), and average annual sales price was 20,000 yuan/ton (-21.2% year on year). The decline in refrigerant prices was mainly due to the fall in the price of R142b, and the prices of major third-generation refrigerant products have recovered. The average annual prices of R22, R142b, R32, R134a, and R125 in 2023 were 2.0, 2.1, 1.5, 2.4, 25,000 yuan/ton, with year-on-year changes of +12.6%, -84.3%, +10.1%, +7.3%, and -28.9%. In 2023, the fluorine foaming agent sector achieved operating revenue of 190 million yuan (-45.1% YoY), achieved gross profit margin of 55.1% (YoY +23.9pct), achieved export sales volume of 88,000 tons (YoY -52.7%), and achieved an average sales price of 20,929 yuan/ton (+16.0% YoY). Due to the reduction in the second-generation foaming agent R141b quota, the company's fluorine foaming agent sales volume decreased. In 2023, the company's hydrogen fluoride division achieved operating revenue of 570 million yuan (-13.4% year over year) and achieved a gross profit margin of 7.1% (-6.8pct year on year).

2024Q1's refrigerant sector ushered in a reversal of momentum. 2024Q1 achieved export sales of 32,000 tons of fluorine refrigerants (+19.9% year-on-year, +24.4% month-on-month). In 2024, the company's total second-generation plus third-generation quota was 128,300 tons, accounting for 25.2% of the year's quota sales in the first quarter. The average price of 2024Q1 refrigerant was 24,000 yuan/ton (+8.5% YoY, +25.7% YoY). 2024Q1's fluorine foaming agent achieved export sales volume of 0.22 million tons (-8.7% YoY, -16.7% month-on-month) and achieved an average sales price of 16,000 yuan/ton (-27.3% YoY, -11.4% month-on-month).

The refrigerant product boom is expected to continue to rise, and the company is expected to fully benefit. In 2024, the third-generation refrigerant industry quota was issued, and the company received a quota of 117,000 tons of third-generation refrigerants, which is at the forefront of the industry. As of April 26, 2024, R22, R32, R134a, R125, R143a (Yonghe factory price) prices were +0.5, +1.4, +0.45, +1.75, +28,500 yuan/ton to 2.45, 3.1, 3.2, 4.5, and 60,000 yuan/ton compared to the beginning of the year. As the northern hemisphere heats up, export demand gradually increases, and export prices are expected to follow suit. Downstream air conditioning production schedules are good, and demand for R32 and R410a is growing. With the arrival of summer, it is expected to usher in a peak season for the maintenance market.

Make sufficient technical reserves for downstream expansion. The company has prepared patents for the preparation of new environmentally friendly refrigerants (R1234yf), new environmentally friendly foaming agents (R1233zd), fluoropolymers (polyperfluoroethylene propylene, polyvinylidene fluoride), and fluorine-containing fine chemicals (lithium difluorosulfonimide, lithium hexafluorophosphate, perfluorohexanone) to prepare for the company to consolidate its main business and extend the downstream industrial chain.

The third-generation refrigerant boom is expected to improve over a long period of time, and the company has a high share of mainstream products in the market, which has significant advantages. The estimated net profit for 2024-2026 is $12.5/19.0/3.01 billion yuan, maintaining a “buy” rating.

Risk warning

1. The progress of the new project falls short of expectations;

2. The development of the refrigerant industry falls short of expectations.