\u3000\u3 Shengda Resources Co.Ltd(000603) 916 Sobute New Materials Co.Ltd(603916) )
Performance
On April 28, the company released its first quarterly report. In the first quarter of 2022, the company achieved a revenue of 716 million yuan, a year-on-year decrease of 7.28%, and the net profit attributable to the parent company was 80 million yuan, a year-on-year increase of 2.23%.
Analysis
The epidemic in the first quarter affected the company’s product sales and inhibited the improvement of performance to a certain extent. As a leading manufacturer of water reducing agent, the company’s products are mainly used in real estate, engineering construction and other fields. In the first quarter, due to the influence of Spring Festival and other factors, it is a relatively low season in the whole year. At the same time, affected by the epidemic in East China in March, the overall sales volume of the company’s products decreased year-on-year. Among them, the sales volume of the company’s third-generation water reducing agent decreased by about 12% year-on-year, 45% month on month, and 55% year-on-year, The overall performance of the functional materials that the company has vigorously deployed in recent years has been stable and positive, especially the high end materials applied in the engineering field. Although they have also been affected to some extent, the product sales volume still increased by 41% year-on-year in the first quarter, which alleviated the overall sales pressure to some extent. Due to the impact of the decline of product sales, the overall revenue of the company has decreased month on month, However, benefiting from the improvement of the company’s product prices, the downward range of the company’s overall revenue is relatively limited.
The gross profit margin of products remains at a good level, and there is no great pressure on raw materials for the time being. The company’s third generation water reducing agent production mainly uses ethylene oxide as the raw material. The company has an integrated layout of the industrial chain. The price of ethylene oxide, the raw material, has not increased significantly with the price of crude oil, and the year-on-year change is relatively small. Therefore, the overall cost pressure of the company is relatively controllable. At the same time, due to the rise of the company’s product price and the optimization of product structure, the company’s gross profit margin remains at a relatively good level, The overall gross profit margin in the first quarter was about 39.23%, maintaining a good profitability. At present, the impact of the epidemic in Shanghai on the company is expected to gradually weaken in the second quarter. At the same time, due to the demand of stimulating the economy this year, it is expected to have stronger growth momentum in the second half of the year.
The national layout will be gradually completed, and it is expected to deeply layout the whole regional market and further optimize the cost. The company will build functional materials, water reducing agents and waterproof materials in Jurong, Jiangsu, Jiangmen, Guangdong and Nanjing, Jiangsu. In 2021, the Sichuan base will be put into operation, the sales of the southwest base will be further cultivated, and the projects of the western development can be deeply expanded. The operation of the Jiangmen base laid out by the company in 2022 will basically complete the perfect layout of several major regions in the country, providing a base for the company to further explore the market of Guangdong, Hong Kong and Macao, At the same time, it will help the company to further optimize the transportation cost of existing products and enhance the cost competitiveness.
Investment advice
The company is a leader in the water reducing agent industry with outstanding advantages in technology, brand and industrial chain. Considering the impact of the epidemic, the company lowered its profit forecast for 2022 by 6%. It is predicted that the net profit attributable to the parent company from 2022 to 2024 will be 649 million yuan, 793 million yuan and 944 million yuan. The current share price corresponds to 14, 11 and 9 times of the company’s PE, maintaining the rating of “overweight”.
Risk tips
Fierce competition in the industry drives down profits; Downstream demand does not meet expectations; Raw material price fluctuation risk.
