Matters:
In 2023, the company achieved operating income of 2.01 billion yuan, a year-on-year increase of 17.34%; net profit attributable to shareholders of listed companies was 8.8511 million yuan, a year-on-year decrease of 89.58%. 2024Q1 achieved operating income of 416 million yuan, a year-on-year decrease of 38.79%; net profit attributable to shareholders of listed companies was 8.7725 million yuan, a year-on-year decrease of 78.28%.
Commentary:
Revenue bucked the trend. In 2023, due to high global inflation, a general slowdown in economic growth, a decline in external market demand, insufficient domestic demand, etc., the price of the company's main sales product, industrial-grade blended oil fell sharply. Under such circumstances, the company's operating income still grew 17%. By sector, the operating revenue of industrial and blended oil/ heating/ environmentally friendly treatment/ energy saving and environmental protection equipment businesses was +29.41%/+14.15%/+85.74%/-65.59% year-on-year to 14.27/2.95/2.92/85 billion yuan, respectively.
High costs put pressure on corporate performance. At the gross margin level, the gross margin of the industrial and mixed oil/heating/environmentally friendly and harmless treatment/energy saving and environmental protection equipment business was -2.38/ -5.50/+7.65/+5.25pct year-on-year to 12.13%/20.73%/13.03%/45.21%, respectively. The overall gross margin reached 14.71%, down 4.56 pcts from 2022.
At the cost rate level, the company has invested more in mergers and acquisitions in recent years, and large capital requirements have generated a lot of costs. The financial expense ratio rose from 4.26% in 2022 to 7.23%, and the absolute value increased 99.37% year on year, putting a certain pressure on the company's performance.
Wait for targeted additions to land. On April 28, 2024, the board of directors of the company requested the shareholders' meeting to authorize the board of directors to issue shares with a total financing amount not exceeding RMB 300 million and no more than 20% of net assets at the end of the most recent year to specific targets through simple procedures. If this fixed increase can help the company reduce its balance ratio and relieve financial pressure, it will have a positive effect on future operations.
Domestic demand for biodiesel is expected to open up. On March 29, 2024, the official website of the National Energy Administration published the “Notice of the General Department of the National Energy Administration on Publicizing the Pilot Promotion and Application of Biodiesel”, and Shandong Expressway Group, the indirect controlling shareholder of the company, organized and implemented the “Shandong Expressway Group Promotion and Application Pilot Project”. Under the combined efforts of “national promotion” and “local pilot projects,” domestic biodiesel terminal sales channels are expected to open up, and with the gradual elimination of channel constraints, the current situation of weak domestic demand is expected to be reversed.
Investment advice: downgraded to “Recommended” rating. Since it will take time for the fixed increase to be implemented, we determine that the company's 2024 cost pressure is still high. Therefore, the profit forecast for 2024-2025 was lowered and the profit forecast for 2026 was added. The net profit of the 2024-2026 company is expected to be 0.51/1.11 (previous value was 388/522 million yuan)/138 million yuan, respectively.
Risk warning: Project acquisitions fall short of expectations, UCO, biodiesel price fluctuations, overseas biodiesel policy adjustments, exchange rate fluctuations.