Incidents:
On April 29, 2024, China Chemical released its 2023 annual report and report for the first quarter of 2024: in 2023, the company achieved operating income of 179.196 billion yuan, up 13.10% year on year; realized net profit attributable to shareholders of listed companies of 5.426 billion yuan, up 0.20% year on year; weighted average return on net assets was 9.83%, down 0.88 percentage points year on year. The gross profit margin on sales was 9.41%, up 0.07 percentage points from the previous year; the net profit margin was 3.35%, down 0.31 percentage points from the previous year.
Among them, the company achieved revenue of 47.533 billion yuan in 2023Q4, +25.56% year on month; realized net profit of 1.703 billion yuan, +0.48% year on year, +119.28% month on month; ROE was 3.01%, down 0.25 percentage points year on year and 1.61 percentage points increase month on month. The gross profit margin on sales was 12.71%, down 1.70 percentage points year on year, up 4.76 percentage points from month on month; net sales margin was 4.11%, down 0.75 percentage points year on year, and up 2.03 percentage points from month to month.
In 2024Q1, the company achieved revenue of 45.171 billion yuan, +5.54% year on year, -4.97% month on month; realized net profit of 1,216 billion yuan, +9.50% year on year, -28.59% month on month; ROE was 2.09%, up 0.01 percentage points year on year, down 0.92 percentage points month on month. The gross sales margin was 8.01%, up 0.09 percentage points year on year and down 4.70 percentage points from month to month; net sales margin was 3.01%, up 0.29 percentage points year on year and down 1.10 percentage points from month to month.
Investment highlights:
Business performance increased steadily, new contracts reached a new high, and overseas orders grew rapidly in 2023. The company maintained a steady and progressive development trend, and took solid steps in high-quality development. The company's chemical engineering achieved revenue of 142.373 billion yuan, +20.35%, gross profit margin of 9.87%, year-on-year -0.06pct. The company undertook tasks and project development and construction efforts, carefully planned and organized construction, and a number of major projects such as the Baltic Chemical Complex Project, BASF Zhanjiang Integrated Project, and the Yulong Island Refining and Chemical Integration Project were vigorously promoted, and the chemical engineering business revenue increased significantly; infrastructure achieved revenue of 21.994 billion yuan, -1.84% year-on-year, gross profit margin 7.09%, year-on-year -0.07pct; environmental governance Achieved revenue of 2,842 billion yuan, -18.90% year on year, gross profit margin of 11.35%, -0.01pct; industrial and new materials achieved revenue of 7.715 billion yuan, +4.75% year on year, gross profit margin of 8.07%, year-on-year -0.07pct; modern services achieved revenue of 2,989 billion yuan, -47.34% year on year, gross profit margin of 9.01% year on year, +2.86 pct year on year. By region, the company achieved domestic revenue of 142,382 billion yuan in 2023, accounting for 80.03%, gross profit margin of 9.47%, +0.19 percentage points year on year; overseas revenue of 35.532 billion yuan, accounting for 19.97%, gross profit margin of 9.41%, or -0.18 percentage points year on year.
In 2023, the company confirmed revenue from the Russian Baltic Chemical Complex Project of 15.539 billion yuan, with a cumulative confirmed revenue of 44.834 billion yuan by the end of 2023, and a cumulative repayment amount of 51.895 billion yuan as of the end of 2023.
In terms of period expenses, the company's sales expenses in 2023 were 493 million yuan, +48 million yuan; management expenses were 2,977 million yuan, +374 million yuan year on year. The increase in management expenses was mainly due to the expansion of the company's scale and increases in personnel remuneration, depreciation expenses, etc.; R&D expenses were 6.164 billion yuan, +711 million yuan year on year; and financial expenses were -169 million yuan, +188 million yuan year on year. Net income from changes in fair value of the company in 2023 was -208 million yuan, -267 million yuan; credit impairment losses were -600 million yuan, -364 million yuan year-on-year, mainly due to an increase in bad debt losses in accounts receivable. The net cash flow from the company's operating activities in 2023 was 9.134 billion yuan, an increase of 7.634 billion yuan over the previous year, an increase of 509.09%. The large increase in net cash flow from operating activities was mainly due to the company's tight control of cash flow indicators, rolling cash flow forecasting on a monthly basis, and continuous monitoring and management achieved certain results.
As of the end of 2023, the total amount of orders in hand by the company was RMB 407.601 billion. Among them, the amount of the project that has been signed but has not yet started is RMB 80.91 billion, and the amount of the unfinished portion of the project under construction is RMB 326.691 billion. In 2023, the company signed a new contract amount of 326.751 billion yuan, an increase of 29.828 billion yuan over the same period last year, an increase of 10.05%. Among them:
The amount of new contracts signed domestically was 226.145 billion yuan, down 32.882 billion yuan from the same period last year, accounting for 69.21% of the total number of new contracts signed; the amount of new contracts signed abroad was 10.606 billion yuan, an increase of 62.71 billion yuan over the same period last year, an increase of 165.48%, accounting for 30.79% of the total number of new contracts signed. In terms of business type, the amount of new contracts signed for construction projects was RMB 310.671 billion, accounting for 95.08%; the amount of new survey and design supervision consulting contracts was RMB 4.528 billion, accounting for 1.39%; the amount of new industrial and new material sales contracts was RMB 6.510 billion, accounting for 1.99%; and the amount of new contracts signed for the modern service industry was RMB 3,512 billion, accounting for 1.07%. The company is a pioneer and pioneer in implementing the “going global” strategy. It has constructed a large number of international engineering projects, accumulated rich overseas engineering experience, operated in more than 80 countries and regions around the world, established more than 140 overseas institutions, and has global resource allocation capabilities and large-scale project organization and implementation capabilities. In 2023, the company signed a new Russian Baltic gas to methanol chemical complex project, with a total contract amount of 65.50 billion yuan.
Project development and construction efforts increased, and the first quarter results increased steadily in 2024Q1. The company achieved operating income of 45.171 billion yuan, +2,372 billion yuan; net profit to mother of 1,216 billion yuan, +105 billion yuan, -487 million yuan; and gross profit of 3.60 billion yuan, year-on-year +225 million yuan, and -2,416 billion yuan month-on-month. In terms of period expenses, 2024Q1's sales expenses were 84 million yuan, year-on-year -0.13 billion yuan, month-on-month; management expenses were 925 million yuan, year-on-year +156 million yuan, and +0.35 billion yuan month-on-month; R&D expenses were 959 million yuan, -47 million yuan, and -1,294 million yuan month-on-month; and financial expenses were 173 million yuan, year-on-year, +0.34 billion yuan month-on-month, and +179 million yuan month-on-month. In terms of new contracts, in the first quarter of 2024, the company signed a new contract amount of 127.916 billion yuan, an increase of 23.319 billion yuan over the same period last year, an increase of 22.29%. Among them: The amount of new contracts signed domestically was 105.357 billion yuan, an increase of 7.54% over the previous year, accounting for 82.36% of the total number of new contracts signed; the amount of new contracts signed abroad was 22.559 billion yuan, an increase of 240.21% over the previous year, accounting for 17.64% of the total number of new contracts signed.
Overseas, the company signed Egypt's NCIC Phase III fertilizer project contract (equivalent to RMB 8.180 billion), Bangladesh Deshbandhu Group's polyester PET & PSF project contract (equivalent to RMB 1.84 billion), Sharjah Alef Sila housing construction project contract (equivalent to RMB 1,259 billion), Russia's Baltic Sea Chemical Complex Project Supplementary Agreement 3.2 (equivalent to RMB 1.0 billion), and Sophia of Pakistan's 200,000 tons/year soda ash equipment supply project contract (equivalent to RMB 588 million), etc. The company is stepping up overseas project development efforts and actively integrating and accelerating the construction of a new development pattern with domestic circulation as the main body and mutual promotion of domestic and international dual cycles.
Industrial projects are progressing in an orderly manner, and the industrial enterprise strategy is taking firm steps, the company's industrial development adheres to the “innovation-driven” development model, explores the “technology+industry” integrated development model, with technology research and development as the “core”, focusing on research and development of new chemical materials and specialty chemicals such as high-performance fibers, special synthetic rubbers, engineering plastics, etc., focusing on “card” technologies such as caprolactam, adiponitrile, aerogels, environmentally friendly degradable plastics, etc., to expand the field of high-value-added products in the new materials industry to achieve “industrial backfeeding, R&D support, engineering optimization” organic combination. In 2023, the Tianchen Yaolong caprolactam project produced at full capacity; Guilin Rubber Company, Huayi Equipment Company, and Cangzhou Cooling Company, which belong to China Chemical Equipment Technology Group, all achieved good economic benefits in 2023. High-end equipment focused on the collaborative development of “chemical machinery+rubber machine+molding machine”; the power plant operation project had stable production throughout the year, with remarkable results. The Indonesian Palembang Power Station successfully completed the handover to the local shareholder SSP company in accordance with the law. The production load of the waste treatment project was gradually reduced, and the operating cost was strengthened effectively. Make it bigger, It has become an important field and driving force for the sustainable development of the industrial sector. In 2023, new industrial projects such as Tianchen Qixiang, Hualu New Materials, and Donghua Tianye have accumulated operating data and production experience, continuously optimized operation, and gradually increased production and operating loads. On December 19, 2023, China Chemical Tianchen Quanzhou 600,000 tons/year propylene oxide concentration plant successfully operated at one time and produced qualified 50% concentrated hydrogen peroxide products. In 2023, Siding Kechuang's 30,000 tons/year phase change energy storage materials and other projects were successfully transferred. It is expected to be put into operation in the second quarter of 2024.
Focus on shareholder returns and implement a stable dividend policy
On April 29, 2024, the company announced the 2023 profit distribution plan. The company plans to distribute a cash dividend of 1.78 yuan (tax included) for every 10 shares to all shareholders. As of December 31, 2023, the total share capital of the company was 6,109,470,588 shares. After deducting 26 shares in the company's special securities account that do not have the right to distribute profits, the company plans to pay a total cash dividend of 1,087,485,760.04 yuan (tax included) in 2023, accounting for 20.04% of the net profit attributable to shareholders of listed companies in 2023. The company will rationally arrange future capital requirements according to strategic planning and business development needs, improve the efficiency of capital use, improve the company's profit level, ensure the company's sustainable and healthy development, and create greater returns for shareholders.
Profit forecasts and investment ratings
Taking into account the progress of the company's engineering business and the price spread of industrial products, we made appropriate adjustments to the company's profit forecast. The company's revenue for 2024-2026 is estimated to be 1973, 2182, and 238.7 billion yuan, respectively, and net profit to mother is 60.04, 70.09, and 7.81 billion yuan, respectively, corresponding to 7, 6, and 5 times PE, respectively. The company is a leading chemical engineering enterprise. The industrial project started a second growth curve and maintained a “buy” rating.
Risk warning
Market competition increases risk, risk of downstream demand falling short of expectations, risk of production safety and environmental protection risk project construction progress falling short of expectations, risk of downstream demand falling short of expectations, risk of price fluctuations of industrial products, and risk of failure of ongoing research projects.