The company's revenue and profit have all grown at a high rate, with mixed performance expectations. The company announced that it achieved revenue of 616 million yuan in 2022, an increase of 86.26% over the previous year; achieved net profit of 171 million yuan, an increase of 226.48% over the previous year; and achieved net profit of 148 million yuan after deduction, an increase of 228.37% over the previous year. Among them, 4Q2022 achieved revenue of 158 million yuan, an increase of 71.6% over the previous year; achieved net profit of 37 million yuan, an increase of 230.05% over the previous year; and achieved net profit of 36 million yuan after deduction, an increase of 322.42% over the previous year.
The business structure continues to be optimized and improved, and revenue and gross margin of major products have grown. In 2022, the company's two main products, UHMWPE fiber and composites (including non-woven cloth and bulletproof products), achieved revenue of 256 million yuan/342 million yuan respectively, an increase of 14.53%/251.09% over the previous year; gross margin reached 36.58%/43.1% respectively, an increase of 7.11/4.43 percentage points over the previous year. The main reason for the sharp increase in the company's revenue was the increase in the company's orders, the boom in production and sales, and the sharp rise in volume and price.
Demand for military use continues to be strong, and the civilian market is creating a new curve. The international situation continued to be tense in 2022, leading to increasing demand in downstream markets. 1) In terms of production capacity, as a leading domestic ultra-high molecular weight polyethylene enterprise, the company actively promoted the construction of core production capacity. In June 2022, the Xintai branch added a 500 tons/year non-woven fabric production line, and in November of the same year, after the company's merger and acquisition of Youhebo, it added 1,000 tons of UHMWPE fiber production capacity.
By the end of 2022, the design production capacity of the company's UHMWPE fiber was 4,320 tons, and the composite material production capacity was 800 tons. 2) On the market side, the company grasped mainstream market opportunities and increased the development of the composite materials market while guaranteeing orders from major customers in the civil market. During the year, sales of woolen cloth increased dramatically, up to 198.59%. At the same time, while making full use of the production capacity of the new merger and acquisition company Youhebo to increase the share of civilian use, the company will further expand its expansion in new application fields such as deep-sea aquaculture cages, radar covers, cement reinforcement, and high-end leisure fabrics to create new profit growth points.
The fund-raising project and the Youhebo project are about to be put into operation, and the expansion of production capacity is accelerating. The company actively promotes fund-raising projects and the construction of the holding subsidiary Youhebo to expand production to achieve business development plans. The fund-raising projects “Ultra High Molecular Weight Polyethylene Fiber Industrialization Project with an Annual Output of 4,060 Tons (Phase II)” and “Bulletproof Non-Woven Fabrics and Products Industrialization Expansion Project” are expected to be put into operation one after another this year; the first phase of Youhebo has already reached production of 1000 tons, the second phase of 1000 tons and the third phase of 1000 tons are expected to be put into operation in '24. With the successful commissioning of the above projects, the company's production capacity reached 8,560 tons/year of ultra-high molecular weight polyethylene fiber, 2,800 tons/year of weft cloth, 500,000 bulletproof chest inserts and 180,000 helmets, and the market share will grow further.
Investment advice: The company is a leading domestic ultra-high molecular weight polyethylene fiber enterprise. UHMWPE fiber and non-woven fabric products will benefit from the rapid growth in downstream demand for defense+civil use. We expect the company to achieve net profit of 193 million yuan, 233 million yuan and 288 million yuan in 2023-2025. EPS will be 0.86 yuan, 1.04 yuan and 1.28 yuan respectively, and PE corresponding to the closing price on April 3 will be 24, 20 and 16 times, respectively, maintaining the “recommended” rating.
Risk warning: product price fluctuations, downstream demand falling short of expectations, project construction falling short of expectations.