HUALU-HENGSHENG(600426) 长江证券·2024-11-04 04:09Investment Rating - The investment rating for the company is "Buy" and is maintained [3]. Core Views - The company reported a revenue of 25.18 billion yuan for the first three quarters of 2024, representing a year-on-year increase of 30.2%. The net profit attributable to shareholders was 3.05 billion yuan, up 4.2% year-on-year, while the net profit after deducting non-recurring gains and losses was 3.06 billion yuan, an increase of 5.4% year-on-year. In Q3 2024, the company achieved a revenue of 8.2 billion yuan, a year-on-year increase of 17.4% but a quarter-on-quarter decrease of 8.8%. The net profit attributable to shareholders for Q3 was 820 million yuan, down 32.3% year-on-year and down 28.8% quarter-on-quarter [3][4]. Summary by Sections Event Description - The company released its Q3 2024 report, showing a revenue of 82.0 billion yuan for Q3, with a year-on-year increase of 17.4% but a quarter-on-quarter decrease of 8.8%. The net profit for Q3 was 8.2 billion yuan, reflecting a year-on-year decline of 32.3% and a quarter-on-quarter decline of 28.8% [3][4]. Event Commentary - The third quarter faced challenges due to maintenance and a downturn in market conditions, leading to a decline in quarterly performance. The prices of key products such as urea, DMF, and others saw significant quarter-on-quarter decreases. The company conducted maintenance from August 10 to August 30, impacting the sales of several products. The overall gross margin for Q3 was 17.6%, down 3.0 percentage points from the previous quarter, and the net margin was 10.9%, also down 3.0 percentage points [3][4]. Market Outlook - The market prices for key products are expected to continue facing pressure due to weak terminal demand and the release of new industry capacities. However, there are optimistic signs for recovery in urea prices supported by stable agricultural demand and industrial needs. The company is positioned at the bottom of the cycle, with potential improvements expected as terminal demand recovers and outdated capacities are phased out [4][5]. Future Growth Prospects - The company is actively expanding into downstream fine chemical new materials to enhance product value. New projects in the Jingzhou base are expected to support long-term growth. The company has a strong production engineering capability and cost advantages, which are anticipated to mitigate operational fluctuations. The projected net profits for 2024, 2025, and 2026 are 3.76 billion yuan, 4.34 billion yuan, and 4.89 billion yuan, respectively, maintaining a "Buy" rating [5].