Event: on the evening of June 27, the company announced that it had signed the "Equity acquisition Agreement of Jiangxi Exxon Chemical Materials Co., Ltd." with Jiangxi Exxon Chemical Co., Ltd. and its controlling shareholder Zhejiang Exxon Chemical Co., Ltd. it is proposed to acquire 51% of Jiangxi Exxon Chemical Materials Co., Ltd. with RMB 357 million through equity transfer and cash capital increase. The company transferred the 30% equity held by Zhejiang Exxon with 147 million yuan in cash, and subscribed for 94.29 million yuan of new registered capital of Jiangxi Exxon with 210 million yuan, of which 94.29 million yuan was included in the paid-in capital and 115.71 million yuan in the capital reserve.

Comments:

Proposed acquisition of Jiangxi Exxon, extended layout of refrigerants and fluoropolymers. Zhejiang Exxon is a high-tech private enterprise specializing in the research and development, production and trade of fluorochemical products, with complete production experience and stable market position. Jiangxi Exxon, the subject of this transaction, was originally a wholly owned subsidiary of Zhejiang Exxon, which mainly produces fluorine-containing refrigerant products. At present, Exxon in Jiangxi Province has completed two projects, namely, 1meme, 1meme, 2tetrafluoroethane (HFC-134a) and 1mem1meme, 3meme3-pentafluoropropane (HFC-245fa). Jiangxi Exxon achieved an operating income of about 44.45 million yuan in 2021 and about 36.44 million yuan in the first quarter of 2022. After the completion of this acquisition, the company will extend to the field of fluorine-containing refrigerants and fluorinated polymer materials downstream of the fluorine chemical industry chain with a larger market scale. At the same time, the company's acquisition will further strengthen the synergy of the company's fluorine chemical industry chain. In terms of upstream fluorite and hydrofluoric acid capacity, the hydrofluoric acid expansion project of subsidiary Gaobao Technology is expected to be completed and put into production in 2022, which will increase the company's hydrofluoric acid production capacity to 70,000 tons / year. In addition, the company Sun company Changxing fluorite "fluorite mining expansion project in Caikeng Mining area" is also under construction. With the upgrading of China's fluorine chemical industry and the rapid growth of the output of fluorinated polymer materials, the company will give full play to the collaborative advantages of its upstream and downstream industrial chain to provide a good foundation for the company to quickly enter the business field of fluorinated polymer materials in the future.

The layout of Exxon in Jiangxi has the capacity of the fourth generation refrigerant and the market scale is expected in the future. In May 2022, Jiangxi Exxon has an annual production capacity of 5000 tons. The EIA approval for the reconstruction project of 3-tetrafluoropropene (R1234ze), 10, 000 tons / year R134a and 10, 000 tons / year R1233zd has been obtained. Among them, R1234ze and R1233zd belong to the fourth generation refrigerants, which have the advantages of non-toxic, non-flammable, no flash point and stable chemical properties. Compared with the previous three generations of refrigerants, R1234ZE also has the characteristics of zero ODP (ozone depletion potential), very low GWP (global warming potential), no destruction of the ozone layer, low Greenhouse Effect, and obvious advantages of environmental protection. Under the influence of global warming, the first generation refrigerants have been eliminated worldwide, the second generation refrigerants are at the end of phase out, and the third generation refrigerants are in the process of being phased out. In the future, the fourth generation refrigerants will be expected to replace the previous three generation refrigerants to be vigorously promoted and expand its market scale.

Actively expand the production capacity of fluorine chemical products, broaden the business line and open up the space for growth. At the end of fluorine fine chemicals, the company's "annual output of 5000 tons of 4helium-difluorobenzophenone project" and its subsidiary Gaobao Technology "fluorine fine chemicals series expansion project" are expected to be put into production before the end of 2022. Gaobao Technology "fluorine fine chemicals series expansion project" can add 20,000 tons / year fluorobenzene, 3000 tons / year 4-fluorobenzoyl chloride, 53,000 tons / year high purity potassium fluoride, 14000 tons / year high purity sodium fluoride and 30,000 tons / year anhydrous hydrofluoric acid production capacity. The company also actively distributes production capacity in new energy businesses such as sodium ion battery electrolytes and new lithium salts. Among them, Gaobao Technology, a subsidiary of Gaobao Technology, plans to produce 10000 tons of sodium hexafluorophosphate and 5000 tons of lithium difluorosulfonimide and other fluorine electrolyte materials in Qingliu Economic Development Zone of Fujian Province. In addition, the company has participated in the sodium ion battery electrolyte project jointly with sodium innovative energy, Zhejiang medicine and HTC, and will make use of the patented technology advantages of sodium innovative energy in the field of sodium ion battery electrolyte. build a sodium electrolyte industry project in Hangzhou Bay Fine Chemical Park. The company's forward-looking capacity layout in the field of new energy batteries, such as sodium hexafluorophosphate and LiFSI, is expected to open up room for future development and further enhance the competitiveness of the company.

Earnings forecast, valuation and rating: the company's acquisition of Jiangxi Exxon will further broaden the company's fluorine chemical products business line, allowing the company to expand into the downstream high-end fluorine refrigerants and fluoropolymers. At the same time, the acquisition will further strengthen the company's synergy in the fluorine chemical industry chain. We maintain the company's profit forecast for 2022-2024, and expect the company's return net profit to be 2.01,2.33 and 272 million yuan respectively from 2022 to 2024, maintaining the company's "overweight" rating.

Risk tips: product and raw material price fluctuations, capacity construction risk, downstream demand is lower than expected.