Incident: Zhongfu Condor released the 2024 semi-annual report. The company achieved revenue of 0.732 billion yuan in the first half of the year, a year-on-year decrease of 30.65%, and realized net profit to mother of 24.97 million yuan, a year-on-year decrease of 88.7%. The amount of non-recurring profit and loss such as government subsidies in the current period was 43.42 million yuan, an increase of 20.18 million yuan over the previous year, or 18.45 million yuan after deduction, compared to +0.198 billion yuan in the same period last year. The company's revenue for the second quarter was 0.284 billion yuan, a year-on-year decrease of 41.78%. The loss in the single quarter was 16.81 million yuan. The same period last year was +89.96 million yuan, after deducting losses of 33.77 million yuan, compared to +80.23 million yuan in the same period last year.
Price cuts have dragged down the company's revenue and profit scale growth. The company's revenue declined significantly in the first half of the year. The core reason was the phased imbalance between supply and demand in the industry, fierce price competition, and rapid and significant price cuts. Refer to Baichuan Yingfu. As of the end of June, the mainstream price of T700 high performance small wire bundles in East China was 0.12 million/ton, down 17% from the beginning of the year and 29% from the same period last year. The company's sales volume was growing in the first half of the year, mainly due to a significant year-on-year increase in the supply scale after the second phase of the Xining base project was put into operation in the middle of last year. The company's overall gross profit margin in the first half of the year was 23.32%, a year-on-year decrease of 15.43 pcts. Among them, Q2's gross profit margin was 20.27%, with a decrease of 16.02 pct and 4.98 pct, respectively. It is estimated that the continuous reduction in carbon fiber prices since the second half of 2022 is the main reason for the weakening of the company's profitability. In the first half of the year, the company's expenses rate for the period was 24.51%, an increase of 6.32pct over the same period last year. The cost rate for the Q2 period was 32%, up 10.93 pct year on year. Among them, the sales expense ratio increased by 1.6 pct year on year, mainly due to increased market development efforts in the current period; the management cost ratio increased by 6.51 pct year on year, mainly due to early reserve personnel for the next 0.03 million ton project in Lianyungang, and the corresponding increase in remuneration; the financial cost ratio was negative for the same period last year, mainly due to the increase in capitalization of interest on long-term loans after the Shenying Xining project was put into operation; the R&D cost rate decreased slightly by 0.09 pcts year on year. Corresponding to the net interest rate of 3.41% in the first half of the year, a year-on-year decrease of 17.53pct, of which Q2 changed from profit to loss.
Strengthening cash flow and receivables management has achieved remarkable results. The company's net operating cash flow in the first half of the year was 25.01 million yuan, compared to -0.132 billion yuan in the same period last year. Cash flow improved. In the current period, the company increased its sales repayment efforts, with a sales revenue ratio of 100.46%, a sharp increase of 37.01 pct over the previous year; at the same time, it reduced procurement expenses. The cash amount for purchasing goods and receiving labor payments in the current period was 0.52 billion yuan, a decrease of 17% over the previous year, and the cash on sales ratio was 92.6%, a decrease of 4.28 pcts over the previous year. In terms of receivables management, the total amount of the company's accounts receivable and notes as of the end of June was $0.63 billion, a decrease of 5.95% from the end of Q1.
The industry is declining under pressure, and the company is honing its internal skills. Currently, the structural imbalance between supply and demand in the carbon fiber industry is serious, and it is expected that it will take a long time to break the situation. Despite heavy pressure from the external environment, the company still insists on cultivating internal skills, improving the level of fine management on the production side and the market side at the same time, laying a solid foundation for long-term development.
Profit forecast: Considering the current weak carbon fiber supply and demand situation and the rapid decline in prices and profits, we lowered the company's profit forecast. The company's net profit for 2024-2026 is expected to be 0.04 billion, 0.11 billion, and 0.2 billion, respectively, maintaining a “buy” rating.
Risk warning: the risk of large fluctuations in raw material prices; the risk that downstream demand will be released less than expected; market competition will increase the risk.
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