Description of the event

The company released its report for the third quarter of 2024. From January to September 2024, it achieved operating income of 4.967 billion yuan, a year-on-year increase of 0.62%; net profit to mother of 0.178 billion yuan, a year-on-year decrease of 55.90%; and net cash flow from operating activities of 0.416 billion yuan, an increase of 16.55% year-on-year.

Among them, revenue for the third quarter of 2024 was 1.653 billion yuan, down 4.35% year on year, down 9.46% month on month; net profit to mother was 0.038 billion yuan, down 52.05% year on year, down 57.93% month on month.

Incident comments

Some of the new installations were successfully put into operation as scheduled, and the projects under construction progressed according to plan. During the reporting period, some of the company's new installations were successfully put into operation as scheduled. Among them, the 0.09 million ton/year VA unit was put into operation in January 2024; the 0.02 million ton/year UHMWPE unit was put into operation in March 2024, and sales will gradually increase; the 0.01 million tons/year electronic-grade high-purity special gas unit was successfully launched in May 2024, and the customer factory inspection was promoted simultaneously. The newly built devices mentioned above have been put into operation one after another. Downstream customers of ultra-high molecular weight polyethylene and electronic specialty gas products have a long verification cycle, and production capacity is currently climbing.

Demand for EVA continues to grow steadily, and there is plenty of room for future growth. According to data from the China Photovoltaic Industry Association, in 2023, China added 216.9 GW of PV installed capacity, up 152.0% year on year; module export volume was 208.1 GW, up 34.5% year on year.

According to Bloomberg New Energy's financial report, the world's new installed capacity will reach 444 GW in 2023, an increase of 76.2% over the previous year; the number of new global PV installations will reach 627 GW in 2025. According to Zhuochuang information, China's EVA production in 2023 was 2.154 million tons, with an apparent consumption of 3.339 million tons, an increase of 20.8% over the previous year, and import dependency was 41.7%. Over the next five years, total EVA demand is expected to grow at a compound rate of 9.2%, and total EVA demand will reach 5.55 million tons by 2028.

The company's new EVA production capacity is about to be implemented, and POE will be deployed in the future. The company's EVA products currently have a production capacity of more than 0.15 million tons/year. The device uses ExxonMobil kettle process technology, with a production capacity of 0.2 million tons/year. It is scheduled to be put into operation in 2025. The device uses LyondellBasell tubular process technology. Both sets of plants mainly produce products such as photovoltaic film materials with high added value. After 2025, the company's EVA production capacity will exceed 0.35 million tons/year. The company actively lays out the POE business, plans to build a 0.3 million tons/year PoE project, and produces a series of high-end olefin material products such as POE photovoltaic films and tougheners.

The company has broad room for future growth. 1. New energy sector: 1) The company's 0.2 million tons/year EVA production capacity is expected to be put into operation in 2025; 2) Actively lay out the POE business and plan to build 0.3 million tons/year PoE projects, including the first phase 0.1 million tons/year and the second phase 0.2 million tons/year to produce a series of high-end olefin material products such as POE photovoltaic film materials and tougheners, the “thermoplastic polyethylene elastomer POE project” has begun; 3) “4000 tons/year lithium battery additive VC Project” enters the installation phase. 2. In the field of biodegradable materials: 1) The 0.13 million tons/year PLA project under construction by the company, where the 0.1 million tons/year lactic acid unit and 0.04 million tons/year PLA unit are scheduled to be completed and put into operation in the first half of 2024 and enter trial production; 2) The 0.05 million tons/year PPC unit under construction is scheduled to be completed and put into operation in 2025; 3. Special fine materials field: 0.01 million tons/year electronic grade high-purity special gas device already in 2024 I successfully drove in May.

Without considering future share capital expansion, the company's net profit for 2024-2026 is estimated to be 0.24 billion yuan, 0.32 billion yuan, and 0.46 billion yuan. The PE corresponding to the closing price on October 25, 2024 is 93.4 times, 70.5 times, and 49.0 times, maintaining a “buy” rating.

Risk warning

1. EVA's boom falls short of expectations; 2. The construction progress of the project falls short of expectations.