Zhejiang Longsheng released its third quarterly report for 2020 on October 26. The company achieved operating income of 11.30 billion yuan in the first three quarters, a year-on-year decrease of 32.1%, and achieved a net profit of 3.16 billion yuan (1.78 billion yuan after deduction), a year-on-year decrease of 18.6%. (47.4% after non-deduction), of which the third quarter achieved revenue of 3.70 billion yuan, a year-on-year decrease of 46.9%, and realized net profit attributable to the parent of 890 million yuan (540 million yuan after non-deduction), a year-on-year drop of 34.1% (down 59.5 after non-deduction) %). We expect the company's 2020-2022 EPS to be 1.29/1.48/1.54 yuan respectively, and maintain a "buy" rating.
The volume and price of dyestuffs have fallen, investment income supports performance.
In the context of declining demand in the textile industry, the company’s dye product sales volume was 148,000 tons (Q3: 55,000 tons), a year-on-year decrease of 10.1% (Q3: 13.9% year-on-year), and the average price was 38,800 yuan/ton (Q3: 35,300 yuan/ton ), a year-on-year decrease of 19.6% (Q3 down by 14.3%). The revenue for the first three quarters was 5.78 billion yuan, a year-on-year decrease of 27.8%. In terms of additives and intermediates, the sales in the first three quarters of 2020 were 41,000/59 thousand tons, a year-on-year decrease of 26%/27%, and the unit prices were 1.5/46,000 yuan/ton, a year-on-year increase of 3.7%/4.1%, respectively. It was 6.1/26.8 billion yuan, down 23.3%/23.5% year-on-year. The company's comprehensive gross profit margin fell 0.8pct year-on-year to 40.8%. On the other hand, the company's Q3 financial assets fair value changes and other investment income was 581 million yuan, a year-on-year increase of 359%, supporting the company's performance.