Introduction to this report:
According to the performance forecast, net profit due to mother is expected to increase 66% in 2023, of which 2023Q4 turned a loss into a profit, with an increase of 36% compared to 2021/4. The performance is impressive; new production capacity is expected to be gradually released in 2024, driving continued rapid growth in performance.
Key points of investment:
Investment advice: According to the performance forecast, the 2023-2025 EPS forecast was lowered to 0.50/0.76/0.92 yuan (previously 0.54/0.90/0.99 yuan), the 2024 industry average was given 17 times PE, and the target price was lowered to 12.92 yuan to maintain the “gain” rating.
Incident: The company released a performance forecast. Net profit due to mother is expected to be 445 million yuan in 2023, an increase of 66% over the previous year; deducted non-net profit is 360 million yuan, an increase of 87% over the previous year. Among them, 2023Q4 net profit to mother was 118 million (2022Q4 was -0.3 billion), an increase of 36% over 2021/Q4; 2023Q4 deducted non-net profit of 112 million (2022Q4 was -0.2 billion), an increase of 29% over 2021Q4. The performance was in line with expectations.
Gross margin was significantly restored in 2023, and earnings improved substantially. Demand for downstream orders increased quarterly in 2023. Q1/Q2/Q3 revenue increased 3%/11%/37% year on year, while capacity utilization gradually increased, driving gross margin to improve quarterly. The gross margin for Q1/Q2/Q3 was 20.6%/21.6%/22.8%, respectively. We expect Q4 to continue to have good order demand and production and sales levels, and gross margin is expected to increase year-on-year. In addition, the company received government subsidies in 2023, and the profit side increased. Q4 achieved net profit to mother of 118 million yuan, a record high of nearly five years.
New production capacity will gradually be released in 2024, and the company's performance is expected to continue to grow rapidly. The company's new production capacity of 60,000 tons of Huai'an PA66 was tested in April 2023. The construction of the project went smoothly, and production capacity growth is expected to be gradually released in 2024; the 20,000 ton renewable nylon project is progressing steadily and is expected to contribute more to the increase in performance in 2024. With the release of new production capacity, the company's performance is expected to continue to grow rapidly.
Risk warning: New production capacity launch progress falls short of expectations, downstream order demand falls short of expectations