Event description

On the evening of October 27, China Catalyst released a third-quarter report that the company realized operating income of 408 million yuan, down 5.71% from the same period last year; realized return net profit of 86 million yuan, down 25.47% from the same period last year; realized non-return net profit of 71 million yuan, down 34.64% from the same period last year; and realized basic earnings per share of 0.52 yuan per share.

The results in the first three quarters are in line with expectations, and the performance is expected to resume as the downstream epidemic alleviates. The epidemic repeatedly affects the superimposed rise in natural gas prices, which affects the performance in the first three quarters. In the first three quarters of 2022, the company realized operating income of 408 million yuan, a decrease of 5.71% over the same period last year, a net profit of 86 million yuan, a decrease of 25.47% over the same period last year, and a net profit of 71 million yuan, a decrease of 34.64% over the same period last year. In a single quarter, the company's 2022Q3 realized operating income of 80 million yuan, a decrease of 27.48% over the same period last year, a net profit of 11 million yuan, a decrease of 64.76%, and a non-return net profit of 10 million yuan, a decrease of 59.42% over the same period last year. Due to the impact of the epidemic in Dalian in the third quarter of 2022, domestic orders declined and international orders were delayed. At the same time, the rising prices of natural gas and some major raw materials increased the company's operating costs and reduced its net profit. As the epidemic alleviates and supplies to the lower reaches return to normal, the company's performance is expected to return to growth.

Equity incentive shows confidence, molecular sieve catalyst head enterprises are expected to achieve net profits of 174 million yuan, 228 million yuan and 335 million yuan respectively in 2022-2024. On the evening of October 20, the company issued an equity incentive plan, and the number of stock options to be granted was 8 million, accounting for about 4.54% of the company's total share capital of 176 million shares at the time of the announcement of this incentive plan, of which 6.43 million were granted for the first time, accounting for about 3.65% of the company's total share capital at the time of the announcement of this incentive plan. 157.00 million copies are reserved, accounting for 19.63% of the total rights and interests granted this time, and the exercise price of stock options granted for the first time under the incentive plan is 31.80 yuan per share. The assessment year for the first grant of stock options under this incentive plan is three fiscal years from 2022 to 2024, which is based on net profit in 2021. In 2022, the growth rate of net profit or cumulative net profit is more than 30%. The proportion of exercise at the corporate level is 100%, the growth rate of net profit in 2023 is more than 70%, and the proportion of exercise of the company is 100%. The growth rate of net profit in 2024 is more than 150%, and the proportion of corporate exercise is 100%. According to the condition of the highest proportion of exercise, the company is expected to achieve a net profit of 174 million yuan, 228 million yuan and 335 million yuan respectively from 2022 to 2024. The company's equity incentive fully demonstrates the company's performance confidence.

HPPO method production expansion superimposed rich product matrix provides performance growth momentum HPPO method will enter the production expansion cycle in 2022, with an estimated increase of 1.85 million tons of production capacity, the company has formed a stable cooperation with satellite chemistry, as the HPPO method production capacity has been put into production, the company's titanium-silicon molecular sieve is expected to achieve rapid growth. At the same time, the core products and technologies of the company are independent research and development. In addition, the company has signed strategic cooperation agreements with many well-known universities in China. This R & D model of "independent research and development, supplemented by industry-university-research cooperation" can give full play to the synergy. At present, the company has formed a number of technical reserves such as MTO and MTP catalysts, while actively arranging fixed source denitrification molecular sieves, ethylene glycol catalysts, photocatalysts, m-cresol and other fields.

The company's two major fund-raising projects, "Special Molecular sieves, Environmental Protection Catalysts, Automobile exhaust purification Catalyst industrialization Project" and "Environmental Protection New Materials and Intermediates Project" are also in steady progress, and are expected to be put into production in 2022 and 2023 respectively. As the company's projects have been put into production, the rich product matrix will also provide the company with performance growth momentum in the future.

Investment suggestion

We expect the company's net profit from 2022 to 2024 to be 1.81,2.84 and 410 million yuan respectively, with year-on-year growth rates of 35.4%, 56.9% and 44.4%, respectively. The corresponding PE was 35, 22 and 15 times, respectively. Maintain a "buy" rating.

Risk hint

(1) the progress of project production is not as expected.

(2) the product price fluctuates greatly.

(3) the risk of force majeure of the device

(4) risk of change in environmental protection policy

(5) the growth risk of excessive concentration of customers.