Report guide
The company released its mid-year report. Revenue of 1.071 billion yuan increased 26.02% year on year; net profit to mother of 0.262 billion yuan increased 36.57% year on year; net profit after deducting non-return to mother was 0.249 billion yuan, up 40.49% year on year. 24Q2 revenue was 0.548 billion yuan, up 26.14% year on year and 4.94% month on month; net profit to mother was 0.14 billion yuan, up 29.49% year on year and 14.06% month on month; net profit without return to mother was 0.133 billion yuan, up 30.76% year on year, up 14.88% month on month, and performance slightly exceeded our previous expectations.
Key points of investment
Strong demand, sales reached a record high during the same period
Since 24 years, the tire market has continued to be booming, driving the company's demand for silica. In the first half of the year, sales volume was 0.176 million tons, up 27.6% year on year, reaching a record high for the same period. Looking at a single quarter, 24Q2 sold 0.089 million tons of silicon dioxide, up 22.3% year on year and 2.9% month on month; the average price in Q2 was 6023 yuan/ton, up 2.3% year on year and 1.6% month on month. Q2 The company's procurement prices for soda ash, quartz sand and sulfur changed by -22.95%, -5.37%, and +3.62% year-on-year, respectively, and -10.20%, +0.99%, and +5.25%, respectively. The average price of products increased steadily, and the price of main raw materials declined. 24Q2 company's gross profit margin was 34.48%, up 10.55 pcts year on year and 3.46 pct month on month; net profit margin was 25.43%, up 0.65 pct year on year, and 2.03 pct month on month. The year-on-year increase in net interest rate was weaker than gross profit margin, mainly due to exchange rate effects. The 24H1 company's inventory turnover ratio was 3.89 and the accounts receivable turnover ratio was 2.26, both of which increased year over year; net operating cash flow was 0.215 billion yuan, up 45.62% year on year.
The prospects for rice husk silica are improving. The company has been commercially supplying rice husk in batches. According to the company's announcement, the EU Council voted to pass the Carbon Border Regulation Mechanism (CBAM) on April 25, 23. In the import and export process of goods trade, the EU will levy corresponding fees or quotas on imported products with high carbon emissions levels, which will be officially implemented from January 1, 2026. The company's Anhui Axi biomass (rice husk) project uses rice husk instead of natural gas as fuel, and uses rice husk ash produced by burning rice husk as a silicon base instead of quartz sand to produce highly dispersed silicon dioxide, which can greatly reduce carbon dioxide emissions. Currently, high-dispersion silica products from rice husk ash have been commercially supplied in batches. We are optimistic about the future of biomass products.
New production capacity and new products are progressing steadily, opening up room for the company to grow
By the end of 23, the company's silica production capacity was 0.33 million tons, and 0.1 million tons were under construction. It is expected to be put into operation in December '24. At that time, the company's production capacity will increase to 0.43 million tons, which is expected to further increase the market share of the company's products. Furthermore, in recent years, while consolidating production capacity of highly dispersed silica, the company has also developed a series of products such as silicone rubber, oral care, and silica microspheres. On August 23, '24, it was announced that it is intended to invest 0.5 billion yuan to build 3044 tons/year silica microspheres, 0.5 million litres/year agarose microspheres, and 1,590 tons/year by-product sodium carbonate projects. The company's current product demand is strong, and the subsequent launch of new production capacity and new products is expected to open up room for the company's growth, and we are optimistic about the continued growth of the company's performance.
Profit forecasting and valuation
Demand for products is strong, and the subsequent release of new production capacity and new products is expected to open up new profit margins. Maintaining the 24-26 net profit forecast of 0.499/0.559/0.649 billion yuan, the current price corresponding PE is 13.46/12.03/10.35 times, maintaining the “buy” rating.
Risk warning
Raw material prices fluctuate greatly; customer development falls short of expectations; production capacity investment falls short of expectations; exchange risks, etc.