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Source: Securities Market Weekly
Sun Xudong
It is suggested that the management of Wanhua Chemical should pay close attention to the financial safety of the company and treat every capital expenditure cautiously. The company has a huge amount of capital expenditure year after year, what kind of economic benefits these capital expenditure can produce in the future will be a huge test for both management and investors.
This magazine specially invited Sun Xudong / article
Wanhua Chemistry (600309BinancecryptogamingSH) the profit distribution plan for 2023 is to distribute a cash dividend of 16.25 yuan (including tax) to all shareholders for every 10 shares with the total share capital of 3139746626 shares as the base on December 31, 2023.
On a five-point scale, I give this plan a score of 4.
Wanhua Chemical's dividend payout rate was 30% in 2023, a downward trend compared with previous years. However, most investors do not have much opinion about this. After all, it is a situation that companies are also strapped for money.
Starting from 2024, I no longer list the asset-liability ratio index in the company's cash dividend statement for the past five years and replace it with the Z-value index. In my opinion, compared with the asset-liability ratio, Z-value considers more factors and can measure the financial security of enterprises more accurately.
It can be seen that the Z value of Wanhua Chemical has declined much faster than the dividend payout rate in the past three years.BinancecryptogamingYes. This means that although the dividend payout ratio is falling, the company is making greater efforts to pay out dividends. Therefore, it is not too much to give it a rating of 4 points.
Even so, it is necessary to discuss why Wanhua Chemical's financial situation has declined. When commenting on the company in 2023, I proposed that "Wanhua Chemical should not have too high expectations for its operating cash flow in 2023", but I did not expect that the net cash flow generated by the company's operating activities was nearly 10 billion yuan less than that in 2022. At the same time, the net cash flow generated by the company's investment activities decreased by more than 10 billion yuan compared with the previous year. In this way, the company's free cash flow is about 20 billion yuan less than the same period last year.
In this case, Wanhua Chemical has to make up for the funding gap by increasing its debt. At the end of 2023, the company's interest-bearing liabilities increased to 90.826 billion yuan, an increase of 15.532 billion yuan over a year ago.
The management of Wanhua Chemical should have been aware of the financial problems. Of the company's interest-bearing liabilities, current liabilities fell by 14% year-on-year, while non-current liabilities increased by 146%.
Obviously, the company intends to optimize its debt structure to avoid a liquidity crisis in the future. Previously, even rating agencies have noted that "corporate financing preferences tend to be short-term debt".
With the growth of long-term borrowing, Wanhua Chemical's borrowing rates have also risen-in 2022, long-term borrowing rates were in the range of 0.05% to 3.90%, while in 2023 it became in the range of 0.30% to 4.55%. Thus, although banks are not as sensitive as investors in the bond market, they will never ignore risks.
Judging from the "projects under construction" disclosed in the annual report, Wanhua Chemical will still have a huge capital expenditure in 2024. This has forced people to worry about the future of the company, and there have been doubts about the reasonableness of some capital expenditure.
I reviewed the history of Wanhua Chemical and found that the company was in a more difficult position in 2015 than in 2023: in that year, its return on equity was only 14.67%, while its asset-liability ratio was as high as 68.99%.
At the end of 2023, Wanhua Chemical's asset-liability ratio was 62.67%. Based on the data at the end of 2003, it is estimated that the company's debt will increase by 51.6 billion yuan before the asset-liability ratio can reach the level at the end of 2015 (68.99%). In this way, if 2024 can maintain the same profitability as 2023, unless the company completes most of the projects under construction within a year, its financial situation should not be worse than in 2015.
Even so, I suggest that the management of Wanhua Chemical should pay close attention to the company's financial security and treat every capital expenditure cautiously. The company has a huge amount of capital expenditure year after year, what kind of economic benefits these capital expenditure can produce in the future will be a huge test for both management and investors.
(the writer is a senior investor. This article does not constitute an investment suggestion, based on which the investment risk is at its own risk.