Expansion of sales categories, high increase in 2024Q1 performance
2024Q1's total revenue was 771 million yuan, up 105.36% year on year, and net profit after deducting non-return to mother was 42 million yuan, a significant increase of 88.42% year on year. The sharp increase in revenue stemmed from the expansion of the company's sales categories and the lower initial base due to technological transformation and discontinuation of production at subsidiaries. The company is a leading domestic styrene-type thermoplastic elastomer (TPES) enterprise. It currently has an annual production capacity of 195,000 tons/year, ranking third in the country.
TPES products have the characteristics of being non-toxic, harmless, recyclable, etc., and have a good replacement effect for traditional rubber products. The company's TPES products are mainly used to manufacture soles, toys, wires and cables, etc., and the application scenarios are still expanding rapidly. The company is the second domestic enterprise with SEPS industrialization capabilities. It has independent intellectual property rights for SEPS products and core technologies such as polymerization hydrogenation technology, hydrobubbling technology, purification technology, and grinding technology.
Build a new black masterbatch device to deepen the layout of degradable plastics
The company has product coverage in the PBAR/PBT, black masterbatch/carbon black, and calcium carbonate industries. PBAT is currently the world's leading fully biodegradable plastic, mainly used in express packaging, agricultural film, disposable tableware, etc. The company invested in the construction of 600,000 tons/year PBAT/PBS/PBT flexible production project in 2020, of which the first phase of 120,000 tons was completed and put into operation in December 2021. The company has also invested in the construction of a calcium carbonate masterbatch project to open up an industrial layout that integrates all upstream and downstream degradable plastics. Currently, the first phase of the calcium carbonate masterbatch project has been completed. In order to reduce energy consumption of PBT/PBAT in the production process and broaden profit channels, the company's subsidiary Changhong Biotech carried out project technical reforms in 2023 and built 60,000 tons/year of PBAT black masterbatch and carbon black equipment.
Invest in an acrylic industrial park project to create a new growth curve
In order to broaden profit channels and open up new profit growth points, the company plans to invest in the construction of a new acrylic industrial park in the Binhai New Area of Maoming City, Guangdong Province. The total investment of the project is about RMB 11.5 billion, to be carried out in two phases. The first phase is estimated to have a total investment of 600 million yuan to first build 50,000 tons/year acrylic and 50,000 tons/year acrylic production lines. The construction period is expected to be two years. The company holds 90% of the shares in the project, and Ningbo Haoxiang invested 10% of the shares with “acrylic acid and supporting catalyst technology” technology. The project will use propane as a raw material to directly oxidize the intermediate product acrylic, and then use esterification and polymerization processes to produce high-value-added acrylates and SAP products, which meet the development requirements of new quality productivity, enrich the company's product structure, improve economic efficiency, and help the company's transformation and upgrading.
Profit forecasting
The company's revenue for 2024-2026 is 23, 28.3, and 3.54 billion yuan, respectively, and EPS is 0.33, 0.52, and 0.79 yuan, respectively. The current stock price corresponds to PE at 40.9, 25.9, and 17 times, respectively, maintaining a “buy” investment rating.
Risk warning
Downward economic risk; risk of large fluctuations in product prices; risk of project construction falling short of expectations; risk of limited commencement of construction due to environmental protection policies; risk of downstream demand falling short of expectations.