NCIC(SZ:002246) Zheng Quan Zhi Xing·2025-06-22 08:35Core Viewpoint - The report highlights the growth in nitrocellulose demand and the contraction in supply, establishing a performance turning point for Beihua Co., Ltd. (002246) with a "buy" rating recommended [1] Group 1: Nitrocellulose Market Performance - Nitrocellulose business achieved record high gross profit margins, indicating a performance turning point. In 2024, the company reported revenue of 1.947 billion yuan, a year-on-year decrease of 9.83%, and a net profit of -28 million yuan, a decline of 150.99% due to the return of overpaid special order products [3] - The company aims for a revenue target of 2.6 billion yuan in 2025, expecting a year-on-year growth of 34%, with a projected total profit of 140 million yuan, a year-on-year increase of 412% [3] - In Q1 2025, the company achieved revenue of 444 million yuan, a year-on-year increase of 50%, and a net profit of 30 million yuan, a year-on-year increase of 365%, primarily due to increased revenue from nitrocellulose and protective products [3] Group 2: Supply and Demand Dynamics - Global demand for nitrocellulose is increasing, driven by rising ammunition needs. The acquisition of Hagedorn-NC by Rheinmetall is expected to shift production towards military applications, addressing strategic supply shortages [4] - Nitrocellulose total production capacity is projected to decrease from 261,000 tons in 2023 to 198,000 tons in 2024, a reduction of 24%. Domestic production capacity is also significantly declining due to various incidents and the company's decision to shut down its Xi'an production line [4] - With increasing demand and reduced supply, the profitability of nitrocellulose companies is expected to improve significantly. In 2024, China's nitrocellulose exports reached 4.12 billion yuan, with an average price of 26,500 yuan per ton, reflecting a year-on-year price increase of 12% [4] Group 3: Long-term Growth Prospects - The export market for military nitrocellulose and the application of civilian nitrocellulose in the fireworks market present significant growth opportunities. The company has developed environmentally friendly nitrocellulose for fireworks, tapping into a large new market [5] - The protective equipment and industrial pump sectors are also expected to grow, driven by increased demand for activated carbon, catalysts, and environmental equipment as the domestic economy recovers [5] Group 4: Financial Position and Future Projections - As of March 31, 2025, the company had cash reserves of 1.296 billion yuan and trading financial assets of 247 million yuan, indicating a strong financial position to support strategic development [6] - The company is projected to achieve revenues of 2.610 billion, 3.212 billion, and 3.872 billion yuan from 2025 to 2027, with net profits of 137 million, 300 million, and 428 million yuan respectively, suggesting a favorable valuation with corresponding PE ratios of 58, 26, and 19 times [7]