Incidents:
The company released the first quarter report of 2023, achieving revenue of 1.28 billion yuan (-32.6% YoY, +4.67% YoY) and net profit of 50 million yuan (-20.0% YoY, +41.3% YoY). The 2022 annual report was previously released, achieving net profit of 242 million yuan to the mother (+0.73% year on year) and 2022Q4 net profit of 38 million yuan for the whole year.
The PA6 industry is booming low, waiting for recovery to recover tons of net profit levels:
The company's performance increased slightly in 2022, making up for price with volume. 2023Q1 sales declined and prices fell. Performance declined year over year but rebounded month-on-month. According to the announcement, the company's PA6 production and sales volume in 2022 was 454,000 tons and 455,000 tons, respectively, +30.4% and +16.8%; net profit of tons in 2022 was 538 yuan, a year-on-year decrease. The total demand for nylon fiber was insufficient in 2022, and demand for differentiation and new varieties increased. Some of 2022Q4's outsourced production capacity was discontinued for some reason, which affected production and sales. According to Baichuan, PA6 market prices began to fall in the second half of 2022, and began to rise somewhat in early 2023 after bottoming out at the end of the year; due to the relatively strong price of raw caprolactam, profits in the PA6 industry narrowed further in early 2023. The profit of Tengzhou PA6 products newly released by the Superposition Company was temporarily low, causing net profit per ton to fall to 481 yuan in the 2023Q1 quarter. In the future, as demand in domestic textile, automobile and other industries is expected to resume growth, the sentiment of the PA6 industry is yet to recover.
PA6 production capacity is being greatly expanded, and new entrants to the PA66 industry are expected to replicate the PA6 growth path:
According to the announcement, the first phase of the “180,000 tons of polyamide 6 new materials project” in the Shandong Tengzhou plant area of the convertible bond raising project was completed, installed and put into trial operation in the fourth quarter of 2022, and production capacity will be gradually released according to the plan. The company's PA6 equity production capacity is expected to exceed 500,000 tons in 2023. The Tengzhou Plant Phase II 220,000-ton PA6 project is under construction with 180,000 tons expected to be put into operation in 2026. The company announced that it plans to issue convertible bonds, raising a total of no more than 400 million yuan to build the PA6 nylon new material project with an annual output of 124,000 tons of PA6 nylon with a total investment of 1.01 billion yuan, and Shandong Juishun's first phase of the “80,000 tons of PA66 nylon new material project with an annual output of 80,000 tons”, which are expected to be put into operation in 2024 and 2025 respectively. It plans to expand PA6 production capacity in differentiated fields such as copolymer nylon, high-temperature nylon and functional nylon materials, and officially enter the PA66 field. With a breakthrough in the localization of adiponitrile, the key raw material for PA66, the PA66 industry is expected to usher in a period of rapid development.
Investment advice:
The company's net profit from 2023 to 2025 is expected to be 285 million, 360 million, and 450 million yuan respectively, corresponding to 11.2, 8.9, and 7.1 times PE, maintaining the buy-A rating. Give 14 times PE for 23 years, corresponding to the target price of 12.64 yuan.
Risk warning: Fluctuations in product and raw material prices, production capacity construction progress falls short of expectations, etc.