[Case BL: E_ Star Moon MM Graphite] Released the 2023 Annual Report and 2024 Quarterly Report. In 2023, the company achieved operating revenue of 771 million yuan, an increase of 18.35% over the previous year; net profit attributable to shareholders of listed companies was 148 million yuan, an increase of 4.27% over the previous year. In the first quarter of 2024, the company achieved operating income of 118 million yuan, an increase of 9.17% year on year; net profit attributable to shareholders of listed companies was 28 million yuan, an increase of 30.17% year on year.
Comment:
Due to two factors, the increase in the company's net profit was lower than the increase in operating income. (1) The subsidiary Inner Mongolia New Materials invested in a 20,000 ton special and chemical graphite construction project with its own capital was fully put into operation in August 2023. Production was not completed in 2023. The fixed cost was high, causing the subsidiary to lose 19746,900 yuan. (2) The company issued convertible bonds at the end of July 2023 with interest charges of RMB 10.7074 million according to the actual interest rate.
The company develops a number of technologies and products. The unique technology developed by the company - hydrochloric acid deep analysis technology using calcium chloride as an extractant, has been widely used in the polysilicon industry. By adding additives that break azeotropic properties to hydrochloric acid, the analysis produces dry-base hydrogen chloride with a purity of ≥ 99.9% (vol), and the hydrogen chloride content in wastewater ≤ 1% (wt). The company developed and designed graphite carbon crystal coolers to cool high-temperature HCL gas produced as a by-product of potassium sulfate production. The company designed a two-stage concentration device based on the physical characteristics of dilute sulfuric acid. Using dilute sulfuric acid produced as a by-product of chlorine drying and hydrogen chloride drying systems as raw materials, the concentrated sulfuric acid produced by evaporation concentration is produced, and the concentrated sulfuric acid produced is then returned to the chlorine drying system, so that the sulfuric acid in the entire device can be recycled. The company designs and processes equipment that can be used for flue gas cooling up to 1200℃. Gases such as HCL in the flue gas can be absorbed through rapid cooling liquid, and resources can be recycled and reused.
Demand for caustic soda is expected to increase in some developing countries. According to the current industrial structure of developing countries, demand for caustic soda will grow rapidly in Southeast Asia, Africa, and South America in the future. Among Asian countries, there will be a certain increase in caustic soda production capacity in places such as Vietnam, Pakistan, the Philippines, and Indonesia, but these regions as a whole will continue to be in short supply. India in particular, its demand growth rate will exceed the growth rate of production capacity, and imports will increase further.
Investment recommendations and ratings: In 2024-2026, the company's operating income is estimated to be RMB 11.51/14.83/18.08 billion, and net profit to mother is RMB 2.2/3.32/404 billion, respectively. Considering the company's obvious technical advantages in the field of graphite equipment, the commissioning of raw material projects to reduce gross margin fluctuations, overseas caustic soda production capacity is expected to increase, thereby driving product demand, and giving the company a “buy” rating.
Risk warning: the risk that the construction progress of the graphite equipment expansion project falls short of expectations; the risk that the company's demand for various types of graphite equipment falls short of expectations; the risk that overseas caustic soda production capacity growth falls short of expectations; the risk that performance forecasts and valuation judgments fall short of expectations.