Introduction to this report:
In 2023, the company's net profit to the mother increased by 67%, and profit increased steadily; in 2024, new PA66 production capacity is expected to gradually rise, renewable capacity is about to be invested, and the company's performance is expected to continue to grow rapidly.
Key points of investment:
Investment advice: Considering that the pace of renewable energy investment is lower than expected, the 2024-2025 EPS forecast was lowered to 0.68/0.83 yuan (0.76/0.92 yuan before adjustment), and the 2026 EPS forecast was added to 0.97 yuan, giving 2024 slightly lower than the industry average, maintaining the target price of 12.92 yuan, and maintaining the “increase” rating.
Incident: 2023 operating revenue/net profit attributable to mothers/net profit deducted from non-mother was $50.94/4.49/ 364 million yuan, respectively, +27.1%/+67.2%/+88.9% year-on-year. Among them, 2023Q4 revenue was 1,578 billion yuan, +57.9% year-on-year, and net profit attributable to mother/deducted from non-mother was 122/116 million yuan, respectively (-0.29/-0.16 million yuan in 2022/Q4). The performance was in line with expectations.
With downstream brands moving smoothly out of stock, orders in 2023 improved quarterly, and profitability steadily increased.
2023Q1/Q2/Q3/Q4 revenue also increased 2.7%/11.2%/37.3%/57.9%. With the smooth removal of downstream brands, order demand was restored quarterly. 2023 gross margin was +0.1pct yoy to 21.8%, of which Q4 gross margin was +4.4pct yoy to 21.9%. By product: revenue from filament was 2.62 billion yuan, +27.0% year on year, gross margin -1.4 pct year on year; cloth revenue was 1.20 billion yuan, +43.1% year on year, gross margin -0.7 pct year on year; revenue from finished fabric was 1.13 billion yuan, +13.1% year on year, gross margin +4.0 pct year on year. In 2023, the sales/management/R&D expense ratio remained flat year-on-year /-1.3/-0.4 pct. The cost side control was good, and the net margin was +2.1 pct to 8.8% year over year.
Renewable energy is about to be launched, and performance flexibility is expected to continue to unleash in 2024. The company's new production capacity of 60,000 tons of PA66 in Huai'an is expected to gradually climb. Considering the improvement in downstream demand, performance flexibility is expected to continue to be released; the 20,000 ton renewable nylon project is about to be launched, which is expected to contribute to increased performance in 2024 and continue to strengthen the core competitiveness of leaders in the nylon industry chain.
Risk warning: Production capacity climbing falls short of expectations, downstream order demand falls short of expectations