The company released three quarterly reports for 2023, and the results were in line with expectations. According to the contents of the company's announcement, the income in the first three quarters was 4.262 billion yuan (YoY+1.1%), the net profit was 272 million yuan (YoY-3.1%), and the non-return net profit was 275 million yuan (YoY+8.1%). Among them, 23Q3 realized income of 1.492 billion yuan (YoY+4.4%,QoQ+5.1%), net profit of 100 million yuan (YoY+46.2%,QoQ-4%) and non-return net profit of 97.82 million yuan (YoY+43.8%,QoQ-11.9%).
Vietnam factories continue to volume, cord fabric sales increased, profitability affected by the price has declined. In the first half of the year, the company's Vietnam factory has reached full production capacity of 110000 tons of polyester industrial silk, bringing volume growth, but in terms of price, according to Wind data, due to the upstream PTA price decline of about 3.4% year on year, it still has an impact on the price and profit of ordinary silk. According to Baichuan data, the average prices of ordinary high-strength industrial silk and ordinary low-shrinkage industrial silk are about 9196 yuan / ton and 9687 yuan / ton respectively in the first three quarters. It is still in the stage of bottoming out of price difference. In addition, the cord fabric maintains a good demand, and the downstream tire demand is relatively strong this year, so the company is expected to reach a full production capacity of 60,000 tons of cord fabric this year, and the price is also affected by upstream raw materials. As a result, gross profit margins for the first three quarters as a whole fell 1.2pct to 15.95 per cent year-on-year. On the expense side, the overall sales expense rate, management expense rate, and R & D expense rate fell 0.96pct in the first three quarters compared with the same period last year. In addition, the exchange rate delivery loss of investment income was about 10 million yuan, and the overall net profit margin fell 0.31pct to 6.43% compared with the same period last year.
Q3 ordinary silk profits continue to wear the bottom, the demand for cord fabric is strong. According to Baichuan data, the price of polyester industrial silk increased in the third quarter, mainly with the rebound in the price of upstream raw materials such as PTA, but the price difference is still at the bottom, so the gross profit margin has declined. Cord fabric maintained strong demand in the first half of the year, downstream tires in both export and domestic sales maintained a good state in the third quarter, and the industry operating rate of semi-steel was at a new high in the same period, all-steel also had an operating rate of more than 60%, and cord fabric shipments increased.
Overall gross margin in the third quarter fell slightly to 16.91 per cent from the previous quarter. On the expense side, the company's sales expense rate, management expense rate, and R & D expense rate all increased in the third quarter compared with the previous quarter, and the overall 0.97pct increased. The financial expenses were mainly due to the increase in foreign exchange earnings, which made the overall net profit margin decline by 0.64pct to 6.77%.
The production capacity of the main curtain fabric continues to expand, while improving the layout of new materials. According to the company's three-quarter report, the project under construction has been gradually consolidated. By the end of September 2023, the project under construction was about 574 million yuan, an increase of 55.13 million yuan compared with the end of June, mainly for the capital expenditure of the hotel decoration project and the new R & D building project of the research institute. In addition, the company previously announced the implementation of a high-performance tire cord fabric project with an annual output of 18000 tons in Vietnam, with a planned investment of about US $52 million, and is now gradually carrying out equipment selection, which is expected to be gradually put into production in 2025. Based on the original PVC film business advantages, the company's strategic layout of photovoltaic reflective material products is mainly used to enhance the efficiency of photovoltaic backplane power generation, and has obtained the first order in June 2021 for the installation and use of foreign power stations. In 2022, the company obtained the photovoltaic reflective film invention patent, and spared no effort to accelerate the upgrading of photovoltaic reflective materials.
Profit forecast and investment rating: maintain the profit forecast, the estimated net profit from 2023 to 2025 is about 3.9,4.6 and 510 million yuan, corresponding to about 16, 13 and 12 times of PE from 2023 to 2025, and maintain the "overweight" rating.
Risk tips: large fluctuations in raw materials affect profitability; Vietnamese product certification is not as expected; promotion of photovoltaic reflective film is not as expected