Core views:
The company released its 2024 quarterly report. 24Q1 achieved total revenue of 1,639 billion yuan, +28.49% YoY, -0.14%; net profit to mother of 70.22 million yuan, +40.06% YoY, +50.85% month-on-month; gross margin/net margin/ROE (weighted) of 7.94%/5.01%/4.02%, respectively, +1.74/+1.93/+1.26pct.
Demand improved, PA6 spread expanded, compounded the company's Q1 government subsidy increase, and the company's 24Q1 profit increased dramatically. According to the company's annual report, China's PA6 industry is developing rapidly. Domestic PA6 slice imports in 2023 were 226,200 tons, and production and apparent consumption were about 4.975 million tons and 4.718 million tons respectively, up 10.95% and 9.93% year-on-year respectively. According to the company's operating data announcement, 24Q1's nylon slice production volume was 125,300 tons, year-on-year, and -0.12,000 tons; sales volume was 121,000 tons, +16,700 tons year over year, -0.5 million tons month over month; nylon slices/caprolactam prices were +11.02%/+10.38% year over year; according to Wind data, the 24Q1PA6 price difference was +19.69%/+5.21% year over month. The current government subsidy included in 24Q1 was 8.75 million yuan, and other income was 1.83 million yuan, an increase of 14.08 million yuan over 23Q4. The net profit of the 24Q1 company withheld from the mother was 64.27 million yuan, +19.03 million yuan over the previous month.
It is proposed to issue convertible bonds to help expand production and increase the dividend ratio to return shareholders. According to the company's 23-year financial report and convertible bond offering instructions, the company plans to raise no more than RMB 338 million to expand production in the Hangzhou and Zibo projects. The company's production capacity and market share will continue to increase with the construction and commissioning of new projects such as the new nylon material project of the Polymerization Division, the Shandong Polyshun PA66 project, the second phase of the Polymerization Shunluhua PA6 project, and the Changde technical improvement project. The company's 2023 annual report cash dividend was 89.93 million yuan. The dividend ratio increased from 26.9%/27.5% in 21/22 to 45.7% in 23.
Profit forecasting and investment advice. The company's EPS is expected to be 0.94/1.39/1.60 yuan/share in 24-26, respectively. Considering the company's rising product boom and future product growth, maintain a reasonable value of 13.78 yuan/share, and maintain a “buy” rating.
Risk warning. Demand for nylon declined; raw material prices fluctuated sharply; production progress fell short of expectations; production safety incidents.