Description of the event

Sindh New Materials released its 2024 three-quarter report. In the first three quarters, the company achieved revenue of 0.565 billion yuan, a year-on-year decrease of 19.40%; net profit to mother -0.015 billion yuan, a year-on-year decrease of 128.13%; after deducting non-net profit of -0.044 billion yuan, a year-on-year decrease of 267.93%. Q3 achieved revenue of 0.205 billion yuan, down 41.91% year on year and 9.69% month on month; net profit to mother - -0.007 billion yuan, down 123.20% year on year, down 266.71% month on month; after deducting non-net profit - -0.014 billion yuan, down 161.72% year on year.

Incident comments

On the revenue side, Q3's sales volume of anode coatings is expected to decline month-on-month, mainly due to excessive stocking by Q2 downstream anode factory customers, which led to a decline in Q3 procurement volume. On the profit side, the company's overall gross margin in Q3 was 8.23%. The profit margin of the by-product was affected by falling prices, and the profit of the anode coating agent Q3 was also under pressure. On the one hand, production costs at the Northern base rose due to the suspension of the ethylene tar production process in July-August, and secondly, price adjustments for high-end coating products also reduced the overall profit level; looking at the Yutai base alone, it is expected that with the advantage of low price ethylene tar, the profit per ton is relatively good.

In terms of other financial data, the Q3 expense ratio was 12.18%, an improvement over the previous month. Additionally, Q3 accrued asset impairment losses of 0.003 billion yuan, credit impairment losses of 0.002 billion yuan, and the final net interest rate was -3.41%.

Looking ahead to Q4, in terms of revenue, the company's average monthly shipments are expected to pick up; in terms of profit, the integrated ethylene tar production capacity at the Dalian base has now been restarted. Q4 is expected to drive a recovery in production capacity profits at the Dalian base, and the Yutai base will maintain its profit leadership.

Looking ahead, the increase in demand for coating agents brought about by the fast charging trend is slowly showing. I am optimistic that the company will wait for price restoration after the industry clears up, and continue to recommend it.

Risk warning

1. Demand for new energy vehicles and energy storage terminals falls short of expectations;

2. Competition in the industrial chain has intensified.