Core views
Since its establishment, the company has continuously improved its industrial chain. After the 300,000 ton ionic membrane caustic soda project was put into operation, the main raw materials liquid alkali, liquid chlorine and hydrogen were all self-supplied, and the advantages of integration were further enhanced. In 2024, important single products such as oxaxadone, thiazidone, indacarboxylic acid, and para-aminophenol will enter the release period, and the 300,000 ton ionic membrane caustic soda project will also begin to contribute benefits, and profit resilience is strong. With the gradual recovery of the economy and the continuous release of the company's production capacity under construction, performance is expected to grow rapidly. The company currently has downstream intermediates for phosgene, and can also lay out acyl chloride series products and isocyanate series products in the future to achieve revenue and profit growth.
occurrences
The company released its 2023 annual report and 2024 quarterly report
In 2023, the company achieved revenue of 5.868 billion yuan, a year-on-year decrease of 35.25%, and achieved net profit to mother of 1,439 billion yuan, a year-on-year decrease of 37.86%. Revenue for Q1, Q2, Q3, and Q4 was 19.26, 18.46, 13.19, and 777 million yuan, respectively, and net profit attributable to mother was $521, 5.2, 3.01, and 116 million yuan, respectively. The company plans to distribute a cash dividend of 6 yuan (tax included) for every 10 shares to all shareholders.
In the first quarter of 2024, the company achieved revenue of 1,215 billion yuan, +57% month-on-month, a year-on-year decrease of 36.89%, and realized net profit of 225 million yuan to mother, +95% month-on-month, and a year-on-year decrease of 56.80%.
Brief review
Demand was sluggish in 2023, and 2024Q1 performance improved month-on-month in 2023. Affected by the advance order preparation strategy of downstream traders and overseas customers within the previous year, the industry entered the inventory cycle within this year, and the company's volume and price were under pressure. In 2023, the company's raw drug production was 73,500 tons, -8% year-on-year, sales volume was 618,000 tons, -18% year-on-year, the average price of original drugs was 389.07 million yuan/ton, -28% year-on-year, revenue 2.404 billion yuan, -41% year-on-year; fine chemicals production was 642,700 tons, +205% year-on-year, and sales volume was 633,700 tons, +216% year-on-year, with an average price of 0.34 million yuan/ton, -77% year-on-year. The large changes in the production, sales and price of fine chemicals are mainly due to the contribution of ionic membrane caustic soda production. In 2023, the company achieved revenue of 5.868 billion yuan, a year-on-year decrease of 35.25%, and achieved net profit of 1,439 billion yuan to mother, a year-on-year decrease of 37.86%. In terms of profitability, the company's gross margin was 37.84%, -3.15 pct year on year, and net margin was 24.42%, -1.82 pct year on year. Affected by the decline in the pesticide industry, the company achieved revenue of 5.868 billion yuan in 2023, a year-on-year decrease of 35.25%, and realized net profit to mother of 1,439 billion yuan, a year-on-year decrease of 37.86%.
The company's original drug sales volume in the first quarter of 2024 was 15,700 tons, +67% month-on-month, -2% year-on-year, and the average price was 28,200 yuan/ton, -23% month-on-month and -40% year-on-year. The sales volume of intermediates was 163,300 tons, +31% month-on-month, the same year-on-year. The average price was 2,929 yuan/ton, +14% month-on-month and -36% year-on-year. The company's original drug production and sales picked up in the first quarter of 2024, prices were under pressure, and overall performance improved month-on-month. Achieved revenue of 1,215 billion yuan, +57% month-on-month, down 36.89% year-on-year, and realized net profit of 225 million yuan, +95% month-on-month, and 56.80% year-on-year decrease. The gross margin was 31.98%, -7.32pct month-on-month, -6.4pct year-on-year, and the net margin was 18.15%, or -9.59% year-on-year.
As pesticide storage gradually comes to an end, demand is expected to recover, and the company's profits are expected to continue to improve.
Based on phosgene resources, the industrial chain has been extended. Companies with abundant production capacity currently have the most phosgene resources among private pesticide enterprises. The two major production bases have a total licensed production capacity of 320,000 tons/year for phosgene. Currently, the total production capacity is 68,000 tons/year, accounting for only 21% of the licensed production capacity. At the same time, the company is rich in land reserves. Currently, the two major production bases in Guangde and Dongzhi cover a total area of 4,200 acres, and are rich in land resources.
Currently, the company has abundant production capacity under construction. The pesticide product side includes projects such as 3,000 tons of oxazidone, 3,000 tons of cyclizinone, 5,000 tons of thiazinone, and 3,000 tons of indacarboxylic acid; the intermediates include 40,000 tons of p-aminophenol, etc., which were announced to be put into operation on August 9, and the rest of the production capacity under construction will be released from 2024-2025. In terms of nitrochlorinated benzene, the company has 200,000 tons of nitrochlorobenzene production capacity, ranking first in the country. Chlorinated p-nitrobenzene can be extended to downstream p-nitrophenol, p-aminophenol, 3,4-dichloroaniline (the core raw material of the company's dimethoxolone products), etc.; the company has extended o-nitrochlorobenzene to phthalenediamine to produce polymycin and methylthiabendazole downstream, and phthalyldiamine can continue to lay out pharmaceuticals, dye intermediates, etc. downstream. The company currently has downstream intermediates for phosgene, which can gradually lay out pesticide products downward. In the future, acyl chloride series products and isocyanate series products can also be deployed. In the future, the company will continue to lay out new products around the photogas industry chain to achieve revenue and profit growth.
Profit forecast and valuation: The company's net profit for 2024-2026 is estimated to be 1,354 billion yuan, 15.63 billion yuan, and 1,768 billion yuan respectively, corresponding EPS is 1.49, 1.72, 1.94 yuan, and PE is 10.0X, 8.7X, and 7.7X, respectively. Maintain a “buy” rating.
Risk warning: Safety and environmental risks (the company is mainly engaged in the production and sale of pesticide raw materials, preparations, and fine chemical intermediates; some raw materials, semi-finished products or finished products are flammable, explosive, corrosive or toxic substances; the country proposes a “double carbon” target and faces increasing safety and environmental pressure) Fluctuations in raw material prices (the main raw materials required for the company's production are 3,4 dichloroaniline, methanol, liquid alkali, sodium thiocyanate, petroleum benzene, liquid chlorine, etc.; fluctuations in raw material prices will affect the company's production costs); the company's production capacity falls short of expectations (if the project company is under construction) Not enough progress (It is expected that the pace of investment in additional production capacity will slow down, which will affect the release of the company's revenue and performance).