HUALU-HENGSHENG(SH:600426) Minsheng Securities·2024-03-29 16:00Investment Rating - The report maintains a "Buy" rating for the company, indicating a positive outlook for future growth [2][3]. Core Views - The company experienced a decline in revenue and net profit in 2023, with total revenue of 27.259 billion yuan, down 9.87% year-on-year, and a net profit of 3.576 billion yuan, down 43.14% year-on-year [2]. - Despite the drop in product prices, the company achieved significant sales volume growth across its product lines, particularly in new energy materials and chemical fertilizers [2]. - Key projects, including the successful operation of the Jingzhou project, are expected to support future growth [2]. - A successful resolution of a patent dispute related to melamine production has eliminated potential operational disruptions [2]. - The company is projected to see a recovery in net profit from 5.209 billion yuan in 2024 to 6.721 billion yuan in 2026, with corresponding EPS growth [3]. Summary by Sections Financial Performance - In 2023, the company reported a total revenue of 27.259 billion yuan and a net profit of 3.576 billion yuan, with a significant decline in profitability [2][3]. - The fourth quarter of 2023 showed a revenue increase of 9.36% year-on-year, but a decline in net profit compared to the previous quarter [2]. Product Performance - The average selling prices of key products decreased, with new energy materials down 12.13%, chemical fertilizers down 10.45%, and organic amines down 58.99% [2]. - Sales volumes for new energy materials increased by 20.20%, chemical fertilizers by 14.87%, and acetic acid and derivatives by 24.20% [2]. Project Development - The company successfully launched the first phase of the Jingzhou project in November 2023, achieving rapid operational efficiency [2]. - Ongoing projects in Dezhou are also progressing well, contributing to the company's growth strategy [2]. Legal Matters - The company resolved a patent dispute regarding melamine production, allowing it to continue operations without further disruptions [2]. Future Projections - The company is expected to recover with net profits projected at 5.209 billion yuan in 2024, 6.040 billion yuan in 2025, and 6.721 billion yuan in 2026, with corresponding EPS of 2.45, 2.84, and 3.17 yuan respectively [3].