Key points of investment:

The company is headquartered in Shangyu, Zhejiang, and its traditional business is aromatic fluorinated chemicals. After listing, after two capital operations, the company successfully achieved vertical integration and horizontal large-tonnage product layout. The company's long-term development path is clear, the technical foundation is reliable, and performance estimates are expected to double.

The company is a leader in aromatic fluorinated chemicals

The company seized the opportunity of rapid development of domestic quinolone drugs and successfully developed pharmaceutical intermediates such as 2,3,4,5-tetrafluorobenzoyl chloride and 2,4-dichloro-5-fluoroacetophenone. Relying on the accumulation of pharmaceutical intermediate technology, the company successfully developed 2,3,5,6-tetrafluorobenzene series, BMMI, etc. to enter pesticide intermediates. The company's overall R&D capabilities are strong, and it is able to develop key intermediates for new products simultaneously with customers. Fluorine-containing pesticides have also laid out new products. It is expected that the sector's performance will rise steadily.

Implement vertical integration and large product strategic layout

Before listing, most of the company's products were aromatic fluorinated compounds. Taking into account the requirements for hydrofluoric acid quality in the segment of large-tonnage fluorinated chemicals with rapidly growing demand, the company acquired Gaobao Mining in 19, and gradually entered products with high market potential, such as electrolytes and DFBP.

Acquisition of Exxon lays out fourth-generation refrigerants

In June '22, the company acquired Jiangxi Exxen and entered the field of fourth-generation refrigerants. Because fourth-generation refrigerants are environmentally friendly, they have broad application prospects and large market capacity.

Profit Forecasts, Valuations, and Ratings

We expect the company's revenue for 2022-24 to be 16/23/3.8 billion yuan, respectively, with a corresponding growth rate of 6%/44%/62% respectively, and the net profit of the mother returned to the mother is 1.8/33/62 million yuan respectively. The corresponding growth rate is 6%/76%/92% respectively, EPS is 0.56/0.99/1.90 yuan respectively, and the 3-year CAGR is 53%. Considering the obvious advantages of the company's integrated layout, the strategic layout of large products continues to advance, and with reference to comparable company valuations, we gave the company 15 times PE in 2024, corresponding to the target price of 28.5 yuan in 2024, covering and giving a “buy” rating for the first time.

Risk warning: projects under construction fall short of expectations, downstream demand falls short of expectations, risk of falling product prices, risk of increased environmental protection costs