HUALU-HENGSHENG(SH:600426) SINOLINK SECURITIES·2024-04-01 16:00Investment Rating - The report maintains a "Buy" rating for the company, indicating an expected price increase of over 15% in the next 6-12 months [1][8]. Core Views - The company reported a revenue of 27.26 billion RMB in 2023, a year-on-year decrease of 9.87%, and a net profit attributable to shareholders of 3.576 billion RMB, also down by 35.76% [1]. - In Q4 2023, the company achieved a revenue of 7.914 billion RMB, reflecting a year-on-year growth of 9.36%, while the net profit for the same period was 649 million RMB, down 14.09% [1]. - The new production base in Jingzhou is expected to contribute positively to future performance, with stable operations and potential for profit improvement as industry capacity balances out [1][4]. - The company is facing pricing pressure in acetic acid and organic amines due to concentrated new capacity coming online, leading to a decline in average prices by approximately 9% and 1% respectively [1][4]. Summary by Sections Performance Overview - The company’s revenue for 2023 was 27.26 billion RMB, down from 30.25 billion RMB in 2022, with a revenue growth rate of -9.87% [4]. - The net profit attributable to shareholders decreased to 3.576 billion RMB from 6.289 billion RMB in 2022, marking a decline of 43.14% [4]. Operational Analysis - The Jingzhou base has started contributing significantly to production, with output increases in fertilizers, acetic acid, and organic amines by 26%, 97%, and 27% respectively [1]. - The overall gross margin for Q4 2023 was 17.77%, down from 24.33% in Q3 2023, indicating a decline in product profitability [1]. Future Outlook - The company’s revenue projections for 2024-2026 are 32.56 billion RMB, 37.87 billion RMB, and 41.99 billion RMB respectively, with net profits expected to be 4.56 billion RMB, 5.83 billion RMB, and 6.83 billion RMB [1][4]. - The report anticipates a gradual recovery in profitability as industry capacity begins to stabilize, with the Jingzhou base expected to enhance operational efficiency and cost management [1][4].