Summary of Richful (300910.SZ) Earnings Preview and Industry Analysis Company Overview - **Company**: Richful (300910.SZ) - **Industry**: Lubricant Additives - **Market Cap**: Rmb16.8 billion / $2.3 billion - **Current Price**: Rmb56.80 - **12-Month Price Target**: Rmb74.00 - **Upside Potential**: 30.3% [1][4] Key Insights from Earnings Preview - **2Q25 Results Expectation**: - Anticipated delayed revenue recognition from the Middle East due to geopolitical tensions affecting trade routes, particularly the Strait of Hormuz [1][2] - Domestic sales expected to remain strong, inferred from a decline in imports [1][2] - Projected flat quarter-over-quarter (qoq) performance but double-digit year-over-year (yoy) growth for both revenue and net profit [1][15] - **Revenue and Profit Forecast**: - Estimated revenue growth of +10% yoy, with a slight increase of +2% qoq [15] - Expected net profit of Rmb193 million, reflecting a +16% yoy increase [15] - Anticipated impact of Rmb20-30 million on net profit due to delayed revenue recognition from the Middle East [15] Industry Dynamics - **China's Trade Data**: - Overall imports of lubricant additives decreased by -7% yoy, primarily due to declines from North America and Europe, while imports from Asia remained stable [2][19] - Exports from Henan (Richful's headquarters) were flat yoy, with a notable decline of approximately -20% in exports to the Middle East [2][19] - Middle East accounted for about 15% of Richful's exports in 2024 and 17% in 1Q25 [2] - **Market Trends**: - Positive implications for Richful's domestic sales due to ongoing import substitutions [2] - Growth in exports to the CIS region (+3% yoy) indicates a normalization of Richful's export exposure since 2022 [2] Financial Projections - **Revenue and Earnings Estimates**: - Revenue projections for 2024-2027E show a steady increase, with expected revenues of Rmb3,157.5 million in 2024 and Rmb6,038.1 million by 2027 [4][13] - EBITDA expected to grow from Rmb820.5 million in 2024 to Rmb1,812.7 million in 2027 [4][13] - EPS forecasted to increase from Rmb2.48 in 2024 to Rmb4.78 in 2027 [4][13] - **Valuation Metrics**: - Projected P/E ratios indicate a decrease from 17.2 in 2024 to 11.9 by 2027, suggesting improving valuation attractiveness [4][10] - Dividend yield expected to rise from 2.8% in 2024 to 4.2% in 2027 [4][10] Investment Thesis - **Growth Potential**: - Richful is positioned to capitalize on import substitution trends in China, with expectations to double its market share in lubricant additives from 5.6% in 2024 to 13.5% by 2027 [30] - Anticipated revenue CAGR of +35% in domestic sales and +20% in overseas markets over the next three years [30] - **Risks**: - Potential risks include faster-than-expected vehicle electrification, slower industrial production growth, and unexpected increases in raw material prices [33] Conclusion - Richful is expected to navigate current geopolitical challenges while maintaining robust domestic sales and gradually recovering export markets. The company's growth trajectory, supported by favorable market dynamics and strategic positioning, presents a compelling investment opportunity with a maintained Buy rating and a revised price target of Rmb74.00 [1][16][30]