Description of the event
The company released its 2023 mid-year report. In the first half of 2023, the company achieved revenue of 2.77 billion yuan, a year-on-year decrease of 0.53%; realized net profit of 172 million yuan, a year-on-year decrease of 19.03%. In the second quarter, we achieved revenue of 1,419 billion yuan, up 5.39% year on year, and 5.02% month on month over the first quarter; realized net profit of 105 million yuan, up 16.54% year on year, and 55.37% month on month over the first quarter. The company's gross margin for the first half of 2023 was 15.43%, up 1.78% from the first quarter; the company's net profit margin for the first half of the year was 6.24%, up 1.23% from the first quarter.
Incident reviews
Benefiting from the release of production capacity and the steady recovery of downstream demand, the company's Q2 performance improved significantly month-on-month. In the second quarter of 2023, the company achieved operating income of 1,419 million yuan, an increase of 5.02% over the first quarter; net profit to parent was 105 million yuan, an increase of 55.37% over the first quarter. On the one hand, in the first half of the year, the production capacity of the company's Vietnam base with an annual output of 110,000 tons of differentiated polyester industrial filament (Phase I) was fully released, driving a significant improvement in gross profit and net profit. According to the interim report data, the Hong Kong holding company achieved a net profit of 2,472 million yuan in the first half of the year, compared to -85323,300 yuan for the full year of 2022, reflecting that the operating conditions of the company's Vietnam base have greatly improved, or turned a loss into a profit. Meanwhile, global demand for polyester industrial yarn and drapery recovered moderately in the first half of 2023. According to Wind data, in the first half of 2023, China's polyester industrial yarn exports increased by 0.54% year on year, and China's polyester industrial silk fabric exports increased by 83.27% year on year, reflecting a recovery in global downstream demand in the automotive, construction and transportation sectors. With the full release of polyester industrial yarn production capacity and the recovery of overseas demand, we expect the business performance of the Vietnam base to improve further.
The company plans to implement a high-performance tire curtain cloth project with an annual output of 18,000 tons, and the pace of globalization is expected to accelerate further. According to the August 1 announcement, the company plans to invest about 52 million US dollars in self-financing to build a high-performance tire curtain cloth project with an annual output of 18,000 tons, which is expected to accelerate the pace of the company's globalization, form an integrated advantage with the company's polyester industrial yarn production capacity, enhance global competitiveness, and to a certain extent help reduce the risk of international trade friction.
Investment advice
We predict that from 2023 to 2025, the company will achieve revenue of 56.05/60.5/6.764 billion yuan, a year-on-year increase of 1.69%/7.94%/11.79%; net return profit of 388/4.48/554 million yuan, a year-on-year increase of 16.85%/15.45%/23.59%, corresponding EPS of 0.33/0.38/0.47 yuan, and PE 15.38/13.32/10.78 times, maintaining the “holding-B” rating.
Risk warning
Macro environmental risks: Currently, the domestic economy is facing the triple pressure of shrinking demand, supply shocks, and weakening expectations. Geopolitical conflicts continue, which may lead to unstable upstream supply, rising raw material prices, and lower downstream demand, which in turn will have an adverse impact on the company's future business development and business performance.
Competition risks within the industry: China's manufacturing industry faces overcapacity, and the chemical fiber manufacturing industry where the company's chemical fiber products are located is also full of competition. The company leads peers with technical quality advantages. Differentiated products and services are the company's core competitiveness, but fierce market competition may still cause the company's product profit margin to decline.
The risk that the promotion of photovoltaic reflective film falls short of expectations: Currently, the company's photovoltaic reflective film has implemented foreign projects and is continuing to promote the introduction of domestic projects. Since photovoltaic reflective film is an emerging technology, there is uncertainty about early acceptance by customers. If the progress of the project is delayed, it may affect the promotion results in the medium term.
Risk of exchange rate fluctuations: The company's export sales mainly use US dollars and euros as settlement currencies, and overseas business continues to grow, so exchange rate fluctuations may affect the company's profitability.