Downstream demand is weak, and 2024Q3's net profit phase is under pressure

2024Q3, the company achieved revenue of 13.63 billion yuan, -0.363 billion yuan year on year, -0.614 billion yuan; realized net profit to mother of -0.529 billion yuan, -0.153 billion yuan year on year, -0.827 billion yuan month on month; of which gross profit was 0.117 billion yuan, -0.414 billion yuan year on year, -0.253 billion yuan month on month; net investment income -0.012 billion yuan (2024Q2 = 0.814 billion yuan, 2023Q3 = 0.005 billion yuan). 2024Q3, weak downstream demand for the company's main products dragged down performance. Among them, chlorobenzene products sold 0.0633 million tons, -9.76% month-on-month, average sales price 6876.22 yuan/ton, -2.00% month-on-month; chlor-alkali products sold 0.1673 million tons, -3.65% month-on-month, average sales price 1578.74 yuan/ton, -0.03% month-on-month; resin products sold 0.0943 million tons, +5.91% month-on-month, with an average sales price of 11671.50 yuan/ton, month-on-month, month-on-month +1.20%; sales volume of rubber anti-aging agents was 0.0485 million tons, -5.83% month-on-month, with an average sales price of 18014.83 yuan/ton, -5.33% month-on-month.

In terms of period expenses, 2024Q3's sales/management/R&D/finance expenses were 1.31/0.352/0.179/0.174 billion yuan, respectively, +0.05/-0.25/-0.45/+0.006 billion yuan year-on-year, and +0.02/-0.009/-0.005/-0.005 billion yuan. Since 2024, the company has continued to strengthen production safety management, ensure the stable operation of equipment, promote cost reduction and efficiency in the core industrial chain, optimize process and equipment management, further optimize the supply chain in terms of procurement, warehousing, logistics, etc., enhance the competitiveness of the industrial chain; strengthen production and marketing collaboration, implement the “precise marketing, fine management” concept, continuously optimize the market and customer structure, promote technical marketing, enhance product value, promote overseas business layout, and strengthen customer development; make every effort to ensure that construction of projects under construction progresses smoothly and achieve production results as soon as possible.

The production capacity of epichlorohydrin is leading in the country. Steady promotion of multiple projects, the company has shown strong strength in the field of basic raw materials and intermediates. All Lianyungang base projects have been completed and put into operation, the entire carbon 3 industry chain integrated device has been completed, and it has the world's first 10,000-ton glyceryl epoxypropane plant. The 0.15 million tons/year hydrogen peroxide method epichlorohydrin production plant successfully put into operation has consolidated the company's leading position in the domestic industry with the highest production capacity of epichlorohydrin. In the high-performance materials sector, the company has built advantages in the entire epoxy resin industry chain, and the products operate stably. The nylon 66 project successfully broke the international monopoly, and the production expansion plan progressed steadily. As of 2024H1, the 0.05 million ton/year intermediate expansion project is underway. It is planned to further enhance product market influence and profitability through bottleneck transformation and product portfolio optimization. The Yangzhou Modified Engineering Plastics Plant (including modified ABS) has a modified engineering plastics production capacity of 0.024 million tons/year, and production has increased steadily since it was put into operation. The 5,000 tons/year counteraramid production line is now operating at full capacity. The 2,500 tons/year counteraramid expansion project and downstream supporting projects are also further enhancing the company's overall competitiveness. As a global leader in rubber additives, the company leads the global market for anti-aging agent 6PPD. At present, the Lianyungang accelerator project has been handed over.

Furthermore, the company leads the distribution business, and its subsidiary Sinochem Plastics is the largest chemical distributor in Asia. At the same time, we are actively promoting Sinochem Taixing's 1500 tons/year LCNT series products and R&D customized platform construction project, forming 10,000 tons/year ternary cathode material production line, 2GWH soft-pack lithium battery production line, 0.5 GWH square lithium battery pilot production line, CNAS certified laboratory, and 3,000-ton lithium battery recycling trial production line layout in Ningxia, Jiangsu, and Hebei respectively.

Profit forecasts and investment ratings

The company's 2024-2026 revenue is expected to be 53.208, 59.604, and 61.179 billion yuan, respectively, and net profit to mother is -1.121, 0.279, and 0.606 billion yuan, respectively, corresponding to 2025-2026 PE, respectively. The company adheres to the strategic goal of “building an innovative new chemical materials enterprise driven by technology”, focusing on core industrial chains such as epoxy, engineering plastics, additives, and special fibers to build epoxy resins with core technology and integrated development advantages , ABS, polymer additives, aramid, nylon 66, lithium battery cathode materials and other specialty materials industries. Due to the current pressure on the profitability phase of the company's main products, we downgraded the company's rating to an “gain” rating.

Risk warning

Policy implementation, new production capacity construction progress falls short of expectations, new production capacity contribution performance falls short of expectations, raw material prices fluctuate, environmental protection policy changes, and a sharp decline in the economy.