Report guide
The company released its 2024 mid-year report, achieving revenue of 3.582 billion yuan, a year-on-year increase of 4.35%; net profit to mother of 0.416 billion yuan, a year-on-year decrease of 19.54%; net profit after deducting non-attributable net profit of 0.431 billion yuan, a year-on-year decrease of 10.02%. Among them, 24Q2 achieved revenue of 2.067 billion yuan, up 15.75% year on year and 36.41% month on month; realized net profit of 0.251 billion yuan, down 7.54% year on year and 51.97% month on month; net profit without return to mother was 0.247 billion yuan, down 1.38% year on year and up 34.63% month on month. The performance exceeded our previous expectations.
Key points of investment
Fluorine chemical release, Q2 revenue and profit increased month-on-month
The company's net profit for Q2 increased 52% month-on-month. We expect it is mainly due to the company's fluorinated liquid emissions. 24H1's organic fluorine revenue was 0.71 billion yuan, down 4.72% year on year (some applied to semiconductors are classified as semiconductors), and the gross profit margin was 62.22%, down 10.17pct year on year. The decline in gross margin is expected to be due to changes in coolant caliber and Heidford losses, which dragged down the overall gross profit margin. In the first half of the year, the company's battery chemical sales increased sharply year on year, but product prices continued to decline, achieving revenue of 2.29 billion yuan, an increase of 4.44% year on year, gross profit margin of 13.65%, and a year-on-year decrease of 2.08 pcts. According to Baichuan Yingfu, the average price/gross profit of 24H1 electrolyte was 21,118 yuan/ton and 1,082 yuan/ton respectively, down 47.8% and 55.9% year-on-year respectively. The company's market share of capacitor chemicals increased further. 24H1 achieved revenue of 0.37 billion yuan, a year-on-year increase of 20.07%, gross profit margin of 40.48%, and a year-on-year increase of 2.14 pcts. 24Q2's gross sales margin was 28.37%, up 1.16 pct month on month; net profit margin was 12.36%, up 1.60 pct month on month, and profitability gradually increased month on month. 24H1's net operating cash flow of -0.26 billion yuan is mainly due to increased settlement of current accounts payable due and extended accounts receivable period. The 24H1 company's inventory turnover ratio was 2.82 and the accounts receivable turnover ratio was 1.72, all of which declined year-on-year.
Electrolyte profits are expected to rise steadily. Fluorine chemical emissions accelerate future growth. The company is one of the leading domestic electrolytes. The gross margin of electrolytes in the first half of the year was only 13.65%. According to Baichuan Yingfu's average gross profit of 1,016 yuan/ton of electrolytes since Q3, it is expected that there is limited room for further decline. The company has already started producing 0.04 million tons of electrolyte in Poland, and announced on August 19, '24 that it plans to invest no more than 0.2 billion yuan to build 0.05 million tons/year lithium battery electrolyte. As the share of overseas orders increases, the company's electrolyte profit is expected to rise steadily. Benefiting from the withdrawal of leading 3M and increased AI computing power driven demand for chips and data center coolants, the company rapidly expanded production to respond to demand. Hasford Phase II and Hydefford Phase I were put into operation. The current production capacity is 1,1565 tons, and the operating rate is only 61.42%. As fluorinated liquid and high-end fine fluoride continue to be released, it is expected to accelerate the company's future growth.
Profit forecasting and valuation
The company is a platform-based electronic chemical leader, and electrolyte profits are expected to improve. Organofluorine chemicals have benefited from the withdrawal of overseas leaders and the release of the company's production capacity, and the momentum for performance growth is strong and certain. Maintaining the 24-26 net profit forecast of 1.163/1.858/2.516 billion yuan, respectively, the current price corresponds to 19.99 times PE in 24. The valuation is at the bottom of the company's history, and the “buy” rating continues to be maintained.
Risk warning
Product price fluctuations; customer development falls short of expectations; production capacity investment falls short of expectations; risk of environmental and safety accidents;