occurrences

The company released three quarterly reports, achieving revenue of 5.18 billion yuan in the first three quarters of 2024, +47% year over year; net profit to mother of 0.62 billion yuan, +89% year over year. Looking at a single quarter, 2024Q3 achieved revenue of 1.77 billion yuan, +34% year over year; net profit to mother of 0.19 billion yuan, +35% year over year, -29% month on month. Net profit after deduction was 0.15 billion yuan, +21% year over year and -36% month over month.

Differentiation strategies continue to be promoted, with high year-on-year growth in the off-season

Demand for nylon (nylon) continues to grow due to the upward trend in outdoor products consumption. The company has fully benefited from the upward trend in nylon and steady growth in performance. The first phase of the company's PA66 differentiated nylon yarn project continued to release 0.06 million tons of production capacity. As the green differentiation strategy continued to advance, scale and brand effects continued to show, and off-season performance continued to increase year-on-year.

China's nylon fiber operating rate also increased quarterly from 78% in 2023Q2 to 85% in 2024Q2, and 2024Q3 declined slightly to 83% (Q3 is the low season for nylon demand). The price of 2024Q3 nylon also fell along with the raw materials, but the price difference continued to be strong. The price difference between nylon filament DTY/FDY and slices was +4%/+8% month-on-month, and +3%/+7%, respectively. Looking ahead to Q4, the peak demand season for winter clothing is gradually approaching, and we are optimistic that 2024Q4's nylon business is expected to achieve further high growth.

Chemical recycling products have been certified by GRS, and the recycling project successfully advancing recycled nylon is an important development direction in the current global carbon reduction context. The company is building the first 10,000 ton nylon chemical regeneration device in China, which is expected to add new momentum to the company's development: the company's annual output of 0.1 million tons of differentiated nylon wire project is under construction, and the first phase is about to be put into operation. The chemical recycling method product, PRUECO, has obtained GRS (Global Recycling Standard) certification, continuing to open up space for the company's growth. At the same time, the nylon 66 spinning, cloth, and fabric aspects of the company's layout are expected to fully benefit from the upstream wave of localization of adiponitrile, further opening up space for the company's growth.

High growth continues to be realized and the “buy” rating is maintained

Considering the decline in raw material prices, we expect the company's revenue forecast for 2024-2026 to 6.7/8.4/10.3 billion yuan, respectively, with corresponding growth rates of 32%/25%/23%, net profit to mother of 0.84/1.03/1.29 billion yuan, respectively, corresponding growth rates of 87%/23%/25%, EPS of 0.94/1.16/1.45 yuan/share, respectively, and a 3-year CAGR of 42%. In view of the strong growth of the company's recycled nylon and nylon 66 business, we maintain a “buy” rating.

Risk warning: risk of projects under construction falling short of expectations, risk of weak demand in the nylon industry, risk of market development falling short of expectations