Net profit for the first three quarters of 24 years +71% YoY, Q3 +69% YoY

Chenhua Co., Ltd. released its three-quarter report on October 17: revenue for the first three quarters of 0.685 billion yuan, yoy -4.6%, net profit to mother of 0.067 billion yuan (after deducting 0.047 billion yuan), yoy +70.6% (after deducting yoy +131.2%); Q3 revenue of 0.225 billion yuan, -11.4%/-3.9%, net profit to mother of 0.028 billion yuan, +61.6% year-on-month. The company's net profit grew rapidly in the third quarter. We think it was mainly due to the company's active adjustment of the production structure and good sales of high-value-added polyetheramine grades. It is expected that as demand in the wind power sector picks up, the boom in traditional polyetheramine products is expected to improve.

The price of polyether amine D230 continued to be under pressure. The company adjusted its production structure to stop loss and increase profit. The price of polyether amine D230 was still low in the third quarter of 2024. According to Baichuan Yingfu, the average price of D230 in the East China market was -7% month-on-month to 0.0129 million yuan/ton, and the price difference of polyether amine-epoxy propane-propylene glycol was -5% month-on-month to 0.0055 million yuan/ton. The company adjusted its production structure, discontinued production of the loss-making product D230 and actively produced brands in strong market demand, according to the company's 2024/08/21 investor survey The minutes revealed that the price of other brands is between 0.014 million/ton and -0.03 million/ton, which is more profitable and stops losses and increases profits in a timely manner. The company's gross margin for the first three quarters was +3.6 pct to 20.0% year on year, gross margin for the third quarter was +3.3 pct to 21.7%, the company's sales/management/ R&D/finance expenses ratio for the first three quarters was -0.0/-0.4/+0.2/+0.0pct to 2.7%/6.9%/4.3%/-0.1%, respectively, and the net sales margin was +4.3 pct to 9.5% year over year.

The mismatch between supply and demand polyether amine D230 still needs to be recovered. The new project is expected to contribute in the future and the price spread of polyether amine companies will shrink markedly. According to Baichuan Yingfu, polyether amine D230 in East China was priced at 0.0135 million yuan/ton on October 17. The polyether amine price and price difference are still at a low level since 2020. Currently, the company produces 0.04 million tons of polyether amine (0.042 million tons polyether) project and polyurethane functional additives project. It is expected that the company will continue to contribute in the future. incremental.

Considering the company's profit improvement and the expected recovery of the industry, raising the profit forecast, maintaining the “gain” rating and considering the good profit situation of the company's polyether amine brands and the expected recovery of traditional brands at the bottom, we raised the profit forecast. The company's net profit for 24-26 was 0.093/0.108/0.12 billion yuan (previous value 0.082/0.088/0.099 billion yuan). The year-on-year growth rates were 53%/16%/11%, corresponding EPS was 0.44/0.51/0.56 yuan, combined with an EPS of 0.44/0.51/0.56 yuan. Comparatively, the company's 25-year Wind unanimously expected an average valuation of 21xPE, giving the company 21xPE in 25 years, with a target price of 10.71 yuan, maintaining an “gain” rating.

Risk warning: There is a risk that downstream demand will continue to be sluggish, and the risk that new projects will not progress as expected.