HUALU-HENGSHENG(SH:600426) Guohai Securities·2024-03-31 16:00Investment Rating - The report maintains a "Buy" rating for the company [2] Core Views - The company experienced a decline in performance in 2023, with revenue dropping by 9.87% year-on-year to 27.26 billion yuan and net profit decreasing by 43.14% to 3.576 billion yuan. However, the production commencement of the Jingzhou Phase I project is expected to enhance growth potential [3][4][9] Summary by Sections Financial Performance - In 2023, the company reported revenue of 27.26 billion yuan, a decrease of 9.87% year-on-year. The net profit attributable to shareholders was 3.576 billion yuan, down 43.14%. The weighted average return on equity (ROE) was 12.81%, a decline of 12.77 percentage points [3][4] - For Q4 2023, the company achieved revenue of 7.914 billion yuan, an increase of 9.36% year-on-year, but net profit fell by 14.09% year-on-year to 649 million yuan [3][7] Market Conditions - The chemical industry faced challenges in 2023 due to demand contraction, supply shocks, and weakened expectations, leading to increased competition and lower product prices. The average price of urea was 2,495 yuan/ton, down 8.63% year-on-year, while DMF prices dropped by 53.21% to 5,645 yuan/ton [4][3] Growth Drivers - The Jingzhou base's Phase I project was completed and began operations, achieving rapid profitability. The company also successfully launched high-end solvent projects and is advancing its nylon 66 high-end new materials project [4][8] - The company’s new energy materials products saw a sales volume increase of 20.20% year-on-year, generating revenue of 15.476 billion yuan, up 5.61% year-on-year [4] Profitability Forecast - The report adjusts profit forecasts, estimating net profits of 5.205 billion yuan, 6.025 billion yuan, and 6.803 billion yuan for 2024, 2025, and 2026, respectively. The corresponding price-to-earnings (PE) ratios are projected at 11, 9, and 8 times [9]