Description of the event
In 2023, the company achieved revenue of 3.93 billion yuan (+4.7% YoY), realized attributable net profit of 330 million yuan (-23.6% YoY), and realized non-net profit of 240 million yuan (-25.8% YoY). With 2024Q1, the company achieved revenue of 970 million yuan (-4.5% YoY), realized net profit of 25 million yuan (-81.4% YoY), and realized non-net profit deducted from attributable non-net profit of 0.07 million yuan (-94.5% YoY).
In 2023, the company plans to pay a cash dividend of $3.00 (tax included) for every 10 shares.
Incident comments
The company is a leading spandex and aramid enterprise, specializing in R&D, production and sales of high-performance fibers. Currently, leading products are spandex, meta-aramid, para-aramid and their upstream and downstream products. At the end of 2023, the company's nominal production capacity of spandex and aramid was 100,000 tons and 26,000 tons respectively, and it is expanding aramid by 26,000 tons/year. The company has three major incremental businesses, including smart fiber, green printing and dyeing, and aramid coated diaphragms, and has excellent future growth.
Gross margin declined in 23Q4 and 24Q1. The gross margins of 23Q4 and 24Q1 companies were 22.4% and 17.7%, respectively, -3.5pct and -10.8pct year-on-year. The sharp decline in the company's gross margin was mainly due to the continued slump in the price of spandex. Combined with the company's new production capacity, the commissioning period for production lines was too long, which led to large losses in the spandex business.
The supply and demand pattern of spandex deteriorated, and the economy was weak. PTMEG prices declined, and the price spread rebounded somewhat. In 2023, domestic downstream applications of spandex expanded and consumption increased; domestic production capacity reached 1.23 million tons, +13% over the same period last year. The industry was in a state of oversupply, and most companies lost money. The company launched a new spandex production line in the Ningxia Park and has been in a state of commissioning for a long time, putting pressure on the gross margin of the spandex business. The company's gross margin of 23H2 spandex was -9.2%, down 12.8 pcts from the previous month on 23H1, contributing to gross profit of -71 million yuan. The average price of 23Q4 and 24Q1 spandex 40D in the industry was 30421 and 28,673 yuan/ton, respectively, -1.1% and -5.7% quarter-on-quarter. The average price differences were 11509 and 12348 yuan/ton, respectively, +1.9% and +7.3% quarter-on-quarter. The main reason for the month-on-month improvement in price differences was the decline in the price of PTMEG, a raw material for spandex. The average prices for 23Q4 and 24Q1 were 19185 and 1,6041 yuan/ton, respectively, -3.1% and -16.4% from quarter to quarter. In 2023, the company sold 52,000 tons of spandex, an increase of 28.9% over the previous year.
Construction of new aramid projects is progressing at an accelerated pace, and revenue continues to grow. In 2023, the company accelerated the construction of new aramid projects, continuously improved production efficiency, reduced production costs, optimized product structure, and continuously optimized the layout of the industrial chain; at the same time, in line with global development trends, further improved the global marketing network layout, and continued to break through overseas sales. Benefiting from this, the company's aramid production and sales increased markedly in 2023. Production volume and sales volume reached 18,900 tons and 17,200 tons respectively, +25.9% and 21.3% over the same period last year. Gross margin was 40.8%, up 0.4 pct year over year. Benefiting from volume increases, the aramid sector's revenue and gross profit increased by +4.7% and +9.6% year-on-year, respectively.
Lithium battery coatings create new requirements, and the viability continues to be verified. The aramid coated diaphragms developed and produced by the company have high temperature resistance, good wettability, strong adhesion and high ionic conductivity, which can effectively improve battery performance and reduce industry costs. In 2023, the company's 10 million square aramid coating production line has achieved continuous and stable operation. The aramid coating membrane project has passed on-site audits by many battery customers, and has also made good progress in power batteries, household storage batteries, low temperature batteries, semi-solid state batteries, etc. Some customers have achieved small-batch orders, and new workshops and production lines are already under construction.
Maintain a “buy” rating. The company is a leading spandex and aramid enterprise. The spandex industry boom is at the bottom, and there is huge room for aramid import substitution. In the field of new materials, the company's aramid coated lithium battery separators have excellent performance and large future market space. The company's net profit for 24-26 is estimated to be 3.54/5.37 billion yuan, respectively.
Risk warning
1. Competition in the spandex industry has intensified; 2. The progress of aramid import substitution is lower than expected; 3. Aramid lithium battery coating has fallen short of expectations.