Core views

The company achieved significant improvements in revenue and profit margins in the first quarter, and downstream demand began to pick up; it is anticipated that subsequent sebacic acid projects will gradually expand as overseas customers develop, the Q1 inflection point will be established, and the company's performance growth will continue. In addition, the company is actively expanding green long-chain binary acid products, and the new bio-based pyridine is about to be industrialized; the company and China Merchants Bureau are continuing to advance. Currently, the company's bio-based polyamide products have cooperated in the fields of containers, refrigerated trucks, new energy, etc., and it is expected that promotion will be accelerated through the help of China Merchants Bureau.

occurrences

On April 29, the company released its annual report for the year 23 and the quarterly report for 2014. The company achieved revenue of 2.14 billion yuan in 23, -13.4% year-on-year, and net profit to mother of 367 million yuan, or -33.8% year-on-year.

Among them, Q4 revenue in '23 was 549 million yuan, -9.1% YoY, +2.6% month-on-month; net profit to mother was 53 million yuan, -21.5% YoY and -26.9%. In Q1 '24, we achieved revenue of 685 million yuan, +35.4% year over month, +24.8% month on month; net profit to mother of 105 million yuan, +83.4% year over year, +100.0% month on month.

Brief review

Q1 Revenue increased significantly over the same period last year, and profit margins picked up

In 23 years, downstream demand for long-chain binary acid was weak, prices were under pressure, and revenue declined. In '23, the company's long-chain binary acid series (containing sebacic acid) sold 60 million tons, +2.0% year over year, gross profit margin of 37.86%, and -2.8% year over year. Downstream demand continued to pick up in Q1. The company's traditional main business, long-chain dibasic acid, and sebacic acid, a new project, began to expand, and revenue ushered in a clear inflection point in growth.

In terms of profit, the company's gross profit margin in '23 was 28.79%, -6.5 pct. The Q1 gross profit margin in '24 was 28.68%, -5.4pct year over year, and -1.0pct month-on-month. Benefiting from a sharp decline in the cost ratio, the 24Q1 net interest rate increased sharply from month to month. Among them, management/R&D/finance expense ratios all declined significantly from month to month.

Actively expand green long-chain binary acid products. The new bio-based Pidol product will soon be completed in 23 years of industrialization. The company will soon complete a project with an annual output of 30,000 tons of long-chain binary acid and 20,000 tons of long-chain polyamide, laying the production capacity foundation for downstream applications and business expansion. Over the past 24 years, the company has been seizing market opportunities, increasing sales of long-chain binary acid, while making every effort to expand the new product sebacic acid market and increase customer share. Furthermore, the company is promoting the industrialization of bio-based long-chain binary acids using fatty acids to replace alkanes as raw materials.

In terms of new products, bio-based piperidine has completed pilot testing and commenced 10,000-ton industrialization. In '23, the company completed a strategic investment in the AI protein design platform company, Molecular Heart. The two sides are cooperating on projects such as improving catalysis for key enzymes. In the future, they will collaborate deeply, actively explore new paradigms of synthetic biology research and development, and open up space for new products.

Join hands with China Merchants Group and other companies to strengthen market promotion to help the company introduce the China Merchants Group's fixed increase plan as an indirect shareholder in 2023, combining the company's product characteristics and China Merchants Bureau's resource endowments to jointly develop bio-based polyamide fiber composites, pultrusion processes and application technologies in the fields of containers, construction, photovoltaics, logistics, etc., to achieve “plastic instead of steel, plastic instead of aluminum, and thermoplastic instead of heat fixing”. Currently, the two sides have cooperated on bio-based nylon composites.

In January '24, the company signed a joint venture agreement with South Korea's 3P.COM, which clearly aims to develop thermoplastic bio-based polyamide composites for biological applications in hydrogen storage and transportation, urban air traffic, and wind power blades.

Profit forecasting and valuation: The company's main business boom has reached an inflection point, and the China Merchants Bureau is expected to accelerate the promotion of bio-based polyamides. The company's net profit for 2024-2026 is estimated to be $601, 8.24, and 1.05 billion yuan, with corresponding PE being 51.7X, 37.7X, and 28.1X respectively, maintaining a “buy” rating.

Risk warning: downstream demand falls short of expectations; raw material prices fluctuate; capacity construction falls short of expectations; fixed growth falls short of expectations.