HUALU-HENGSHENG(SH:600426) HTSC·2025-04-27 08:56Investment Rating - The report maintains a "Buy" rating for the company [7] Core Views - The company reported Q1 2025 revenue of 7.77 billion RMB, a year-on-year decrease of 2.6% and a quarter-on-quarter decrease of 14%. The net profit attributable to the parent company was 707 million RMB, down 34% year-on-year and 17% quarter-on-quarter, which aligns with expectations [1] - The coal chemical cost continues to improve, and new projects are gradually advancing, supporting the company's growth potential [3] - The report anticipates a recovery in product prices and demand, which could enhance profitability in the future [4] Summary by Sections Financial Performance - Q1 2025 revenue was 7.77 billion RMB, with a net profit of 707 million RMB, both showing declines compared to the previous year and quarter [1] - The overall gross margin for Q1 was 16.4%, reflecting a year-on-year decrease of 5.5% and a quarter-on-quarter increase of 1.3 percentage points [2] Product Segments - The acetic acid and derivatives segment saw a sales volume decrease of 8% year-on-year and 21% quarter-on-quarter, while the new materials segment experienced a 23% year-on-year increase in sales volume [2] - The fertilizer segment reported a 37% year-on-year increase in sales volume, indicating strong demand despite price pressures [2] Cost and Pricing Outlook - As of April 25, 2025, the prices for key raw materials like urea and DMF showed slight fluctuations, with some products experiencing price improvements due to inventory digestion [3] - The report notes that the cost pressures from coal have eased, with reference prices for thermal coal and anthracite at 570 RMB/ton and 912 RMB/ton, respectively [3] Profit Forecast and Valuation - The forecast for net profit attributable to the parent company for 2025-2027 is adjusted to 3.8 billion RMB, 5.0 billion RMB, and 5.8 billion RMB, respectively, reflecting a downward revision due to weak product demand [4] - The target price for the company is set at 25.34 RMB, based on a 14x PE ratio for 2025, indicating growth potential from new projects and product competitiveness [4][8]