The 2023 results fell short of our expectations, and the 1Q24 results met our expectations.
The company announced 2023 results: revenue of 12.04 billion yuan, +9.6% year on year; net profit to mother of 1.41 billion yuan, corresponding to profit of 0.38 yuan per share, a year-on-year decrease of -47.0%. In 2023, the company achieved deduction of non-net profit of 2,414 billion yuan, a year-on-year decrease of -9.3%. Net profit to mother was lower than our expectations, mainly due to the company's accrued litigation liabilities of 964 million yuan.
In 2023, the company achieved investment income of 571 million yuan, -26% year-on-year. By the end of 2023, the company's fixed assets reached 17.73 billion yuan, +81% year-on-year, mainly due to the commissioning and transformation of the Alashan Natural Alkali Project. The company plans to distribute cash of 3 yuan (tax included) to all shareholders for every 10 shares, with a dividend ratio of about 5%.
The 4Q23 net profit of the company withheld from mother was 876 million yuan, +157.1%/+93.4% year-on-month, mainly due to the increase in the company's contribution to the Alashan Natural Resources Project. The company accrued an estimated debt of 964 million yuan in litigation with the participating subsidiary Wushenqi Mengda Mining Co., Ltd., resulting in net profit of -096 million yuan in 4Q23, or -130.5%/-121.1%, respectively.
1Q24 achieved revenue of 3.28 billion yuan, +31.0%/-18.1% year-on-month, net profit after deducting non-return to mother of 568 million yuan, and -13.0%/-35.1% year-on-month, in line with our expectations.
Development trends
Product prices fell, and the release of the company's new production capacity contributed to the increase in profits. In 2023, the sales price of a single ton of the company's main products, soda, baking soda/urea, was -8%/-26%/-13% year-on-year, and the unit cost was -12%/-11%/-7%, respectively. The soda ash market showed a U-shaped trend in 2023. According to Baichuan Yingfu, the average quarterly price of 1-4Q23 heavy soda ash was 2957/2559/2636/2,774 yuan/ton, respectively. According to the announcement, the first phase of the company's Yingen Mining Alashan Natural Project was put into trial in June 2023, and production capacity was gradually released, which was the main reason for the month-on-month increase in profit in the third and fourth quarter.
Natural alkali faucets continue to gain strength, expand production and increase market share. According to the announcement, as of April 2024, part of the production line of the first phase of the Alashantaxylin natural alkali project has been put into operation. The first, second, and three production lines of the project have been put into production, and the fourth production line is under test; construction of the second phase began in December 2023.
According to the announcement, at the end of 2023, the company's soda ash/baking soda production capacity reached 5800/1.5 million tons/year respectively, becoming the leading domestic soda ash leader. We are optimistic about the growth brought about by the company's new production capacity.
Profit forecasting and valuation
We maintain our 2024 profit forecast of 2.62 billion yuan, and first introduced a profit forecast of 3.27 billion yuan for 2025. The current stock price corresponding to 2024-2025 P/E is 9/7x, respectively. Maintaining a target price of 8.26 yuan, corresponding to the 2024-2025 12/9x price-earnings ratio, there is 32% room to rise compared to the current stock price, maintaining the “outperforming industry” rating.
risks
Prices of major products fell, coal prices fluctuated, and the pace of commissioning new production capacity fell short of expectations.