Huafeng Chemical released its 2024 semi-annual report: in the first half of the year, the company achieved operating income of 13.744 billion yuan, YoY +8.89%, net profit to mother of 1.518 billion yuan, and YoY +11.74%.
The release of the company's new production capacity led to an increase in production and sales, and the profit level increased accordingly. On the revenue side, in the first half of 2024, the company's spandex and adipic acid sectors released new production capacity compared to the same period last year. Production and sales of major products all increased year-on-year, driving the company's revenue growth. On the profit side, the company's comprehensive gross margin fell slightly by 0.96 percentage points year-on-year to 16.52% in the first half of the year, but the company's net profit increased due to a slight decline in the company's sales expenses ratio and management expenses ratio.
Production capacity continues to expand, and scale advantages are strengthened. The company has been deeply involved in the polyurethane industry for many years, and its main products are large. Among them, the production capacity and output of spandex rank second in the world and number one in China, and the production of polyurethane stock solution and adipic acid are the first in the country, and it has a strong scale advantage. According to the company's 2023 annual report data, the company's spandex production capacity is 0.325 million tons (of which 0.1 million tons were officially produced in July 2024), and currently 0.2 million tons of differentiated spandex production capacity are still under construction; adipic acid production capacity is 1.355 million tons (of which 0.4 million tons of production capacity will be put into trial operation in September 2023); and polyurethane stock solution production capacity is 0.52 million tons. In addition, the company's major projects under construction include a PTMEG spandex industry chain deepening project with an annual output of 0.24 million tons and an integrated natural gas project with an annual output of 1.1 million tons (Phase I). In the future, with the gradual increase in the capacity utilization rate of new production capacity for spandex and adipic acid, and the smooth progress of projects such as spandex under construction, it is expected that the production capacity of the company's three major products will all be among the highest in the world, further enhancing its scale advantage.
Company profit forecast and investment rating: The company is a leading enterprise in spandex, adipic acid and polyurethane stock solutions. It has obvious advantages in scale, technology and cost. It will continue to further cultivate the industry and strengthen its scale advantage in the future. We maintain our profit forecast for the company. Net profit for 2024-2026 is 2,984, 34.72 billion yuan, and 38.79 billion yuan, respectively, corresponding EPS is 0.60, 0.70, and 0.78 yuan, respectively. The P/E values corresponding to the current stock price are 12, 11, and 9 times, respectively. Maintain a “Highly Recommended” rating.
Risk warning: Product prices are falling; new industry capacity is being invested too fast; industry demand is falling.