HUALU-HENGSHENG(SH:600426)2024-04-04 16:00Investment Rating - The report maintains an "OUTPERFORM" rating for the company with a target price of Rmb36.89, representing a potential upside of 1.21% from the current price of Rmb26.40 [1][6]. Core Insights - The company reported a total revenue of Rmb27.26 billion in 2023, a year-on-year decline of 9.87%, and a recurring net profit of Rmb3.703 billion, down 42.28% year-on-year. The decline in revenue was primarily attributed to falling product prices [5][13][14]. - The company is actively advancing major projects to enhance production capacity, which is expected to provide long-term growth opportunities. Significant projects include the completion of the Jingzhou base phase I project and the ongoing development of new energy and new materials projects [15][16]. - The company has implemented measures to reduce energy and material consumption while increasing product volume, thereby consolidating its low-cost advantage [16]. Financial Summary - Revenue and Profit Forecasts: - Projected revenues for 2024, 2025, and 2026 are Rmb34.33 billion, Rmb36.64 billion, and Rmb39.11 billion, respectively, with expected growth rates of 26%, 7%, and 7% [2][9]. - Projected net profits for the same years are Rmb4.614 billion, Rmb5.240 billion, and Rmb5.589 billion, with growth rates of 29%, 14%, and 7% [2][9]. - Earnings Per Share (EPS) is expected to be Rmb2.17 in 2024, Rmb2.47 in 2025, and Rmb2.63 in 2026, reflecting a decrease from previous estimates due to falling product prices [6][17]. - The gross profit margin is projected to improve from 20.9% in 2023 to 22.8% by 2026, indicating a recovery in profitability [2][12]. Market Performance - The company's stock has underperformed in the past year, with a decline of 23.1% over the last 12 months, while it has outperformed the MSCI China index by 23.1% [2][3]. - The market capitalization is reported at Rmb56.06 billion (approximately US$7.75 billion) with an average daily trading volume of US$50.64 million [1][2].