Incident: On August 30, 2024, Akeli released its 2024 mid-year report. The company's 1H24 revenue was 0.242 billion yuan, down 13.30% year on year; net profit to mother was 1.9829 million yuan, down 87.75% year on year; net profit after deducting non-net profit was 0.3292 million yuan, down 97.66% year on year. The corresponding company's 2Q24 revenue was 0.139 billion yuan, up 34.79% month on month; net profit to mother was 0.7919 million yuan, down 33.51% month on month.
Comment: Affected by the decline in the price of polyether amine products, 1H24's performance is under pressure. 1H24's revenue for fatty amine/optical materials was 0.145/0.097 billion yuan, YoY -20.86%/1.06%, respectively, and gross margin of 3.04%/22.33%, respectively. Affected by offshore wind power installations falling short of expectations and the high domestic production capacity of polyether amine, the price of polyether amine fell to an all-time low, affecting the company's profits. According to the company's 2024 semi-annual business data announcement, the average price of 1H24's fatty amine/optical materials was 15210.64/29881.82 yuan/ton, a year-on-year decrease of 13.83%/24.71%.
In terms of sales, the company grasps the market demand brought about by high levels of foreign oil and shale oil and gas extraction, actively explores foreign markets, maintains good cooperative relationships with well-known foreign companies such as Schlumberger, and strives to reduce the impact of domestic wind power market demand layout expectations. The company's export volume of polyether amine MA-223 increased slightly year-on-year, and its export volume accounted for 62.22% of the total sales volume of polyether amine. 1H24 sold 9519.86/3244.17 tons of fatty amine/optical materials, with year-on-year changes of -8.15%/34.24%, respectively.
1H24's sales expenses decreased by 52.98% year on year, sales expense ratio was 0.81%, down 0.69 pcts year on year; management expenses decreased 8.00% year on year, management expenses rate was 7.13%, up 0.41 pcts year on year; financial expenses decreased by 14.38% year on year, due to reduced interest expenses. The financial expenses ratio was -2.55%, down 0.61 pcts year on year; R&D expenses decreased 22.64% year on year, and R&D expenses rate was 2.90%, down 0.35 pcts year on year.
The net cash flows of the 1H24 company varied greatly. Net cash flow from operating activities was 15.0097 million yuan, down 65.85% year on year; net cash flow from investment activities was -80.5586 million yuan, down 171.44% year on year; net cash flow from financing activities was -17.5875 million yuan, up 38.83% year on year. The balance of cash and cash equivalents at the end of the period was $0.275 billion, a year-on-year decrease of 26.76%.
Accounts receivable increased by 12.13% year over year, and the accounts receivable turnover decreased from 3.85 times in the same period in 2023 to 3.32. Inventories fell -24.86% year on year, and inventory turnover increased from 4.64 in the same period in 2023 to 5.26.
The industrialization process of COC products is gradually progressing, and kiloton production line companies are expected to start production in 3Q24. 1H24's highly translucent cyclic olefin monomer has been mass-produced and sold in small quantities. A COC kiloton production line has been built. Currently, it is actively communicating with relevant departments and going through trial production approval procedures. It is expected that trial production will be carried out in 3Q24. In addition, 1H24 has set up 2 new self-research projects, namely “development of cyclic olefin copolymers (COC) for biomedical packaging” and “development of cyclic olefin copolymers (COC) for electronic and optical applications” to explore the potential performance advantages of cyclic olefin copolymers and provide adaptation solutions for introducing self-produced cyclic olefin copolymers into emerging application fields to achieve localized replacement and promotion of cyclic olefin copolymers. In terms of the Qianjiang project, the company completed all formalities in the early stages of project construction (safety assessment, EIA, energy assessment, stability assessment, etc.). The civil construction is progressing steadily according to the construction plan, and it is expected that all civil construction will be completed in Q3 2024. We believe that downstream demand prospects for COC products are good. With the gradual advancement of the company's COC industrialization and the gradual completion of the Qianjiang project, the company is expected to open up a second revenue growth curve.
Investment advice: We expect Akoli's revenue for 2024-2026 to be 0.568/0.972/1.184 billion yuan, up 5.9%/70.9%/21.8% year-on-year, and net profit to mother of 0.035/0.126/0.195 billion yuan, respectively, up 48.2%/255.9%/54.8% year-on-year, and corresponding EPS of 0.40/1.43/2.22 yuan respectively. Combined with the company's closing price on September 6, the corresponding PE was 88/25/16 times, respectively. We believe that downstream demand prospects for COC products are good. With the gradual advancement of the company's COC industrialization and the gradual completion of the Qianjiang project, the company is expected to open up a second revenue growth curve and maintain a “buy” rating.
Risk warning: raw material price fluctuation risk, environmental risk, macroeconomic fluctuation risk, R&D risk, management risk, exchange rate fluctuation risk