HUALU-HENGSHENG(600426)2024-11-05 09:40Investment Rating - The report maintains a "Buy" rating for the company [3] Core Views - The company's performance in the first three quarters of 2024 met expectations, with revenue of 25.18 billion yuan (YoY +30.16%) and a net profit of 3.049 billion yuan (YoY +4.16%) [3] - The third quarter saw a decline in profitability due to annual maintenance and narrowing product price spreads, indicating that profits are gradually bottoming out [3] - The company is focusing on cost reduction and efficiency improvement while continuing to invest in high-end chemical projects, which are expected to contribute to profits by the end of 2024 [3] Summary by Sections Financial Performance - In Q3 2024, the company achieved revenue of 8.205 billion yuan (YoY +17.43%, QoQ -8.81%) and a net profit of 0.825 billion yuan (YoY -32.27%, QoQ -28.84%) [3] - The annual maintenance plan in Q3 affected production, leading to a decline in output for various products [3] - The average price spreads for key products fell to historical lows, impacting the gross margin, which decreased by 3.03 percentage points to 17.56% [3] Future Outlook - The company plans to launch several high-end chemical projects, including a 200,000-ton/year BDO project and a 100,000-ton/year anhydride project, which are expected to start contributing to profits in late 2024 [3] - The company has adjusted its profit forecasts for 2024-2026, expecting net profits of 3.95 billion, 4.86 billion, and 6.04 billion yuan respectively [3] Valuation - The current price-to-earnings (PE) ratios for 2024-2026 are projected to be 13X, 10X, and 8X respectively, indicating a favorable valuation compared to historical averages [3] - The current price-to-book (PB) ratio is 1.645X, which is below the historical average of 2.521X, suggesting an absolute margin of safety [3]