Net profit in 2022 increased 67.14% year on year. Optimistic about the company's long-term development, it maintained that “buy” rated companies achieved revenue of 1,597 billion yuan in 2022, +14.62% year on year; net profit returned to the mother was 422 million yuan, +67.14% year on year. Among them, Q4 achieved revenue of 397 million yuan in a single quarter, -6.3% year on year, +4.3% month on month; net profit of the mother was 101 million yuan, +33.0% year on year and -9.9% month on month. Due to the continuous decline in the prices of raw materials such as maleic anhydride and butadiene, the company's product prices are under pressure, but overall gross profit levels have increased, achieving high profit growth throughout the year. We believe that wind power installed capacity is expected to return to an upward trajectory in 2023. With the orderly implementation of the company's new construction projects, the wind power industry may fully benefit in the future. We maintain the company's profit forecast and add a profit forecast for 2025. The estimated net profit for 2023-2025 is 502, 663, and 827 million yuan respectively. The corresponding EPS is 1.69, 2.24, and 2.79 yuan/share, respectively. The current stock price corresponding to 2023-2025 PE is 15.3, 11.6, and 9.3 times, respectively. We are optimistic about the company's future development and maintain the “buy” rating.

Downstream demand, represented by the wind power sector, is expected to increase in 2023. The company's maleic anhydride derivatives, which have a lot of room for growth, had revenue of 1,224 billion yuan in 2022, an increase of 20.98% over the previous year. Among them, the number of products used in the wind power sector exceeded 6,500 tons, accounting for about 10% of overall sales. We believe that the installed capacity of wind power and the penetration rate of the pultrusion process in China will increase together in 2023, while other downstream fields of maleic anhydride derivatives such as power insulation materials and coatings are expected to improve marginal. In 2022, the company produced and sold 702 and 67,600 tons of maleic anhydride derivatives, respectively. The calculated average price was 181,000 yuan/ton. Although sales prices declined quarterly during the reporting period, there was an increase compared to 2021. At the same time, gross margin increased 12.69 pcts over 2021. In addition, the company's functional materials intermediates project achieved revenue of 212 million yuan in 2022, an increase of 5.90% over the same period.

The company's multiple production capacity is being built in an orderly manner, and maleic anhydride derivatives are firmly established. According to the company's announcement, the company's main product, maleic anhydride derivatives, currently has a production capacity of 710,000 tons, with a production capacity of 50,000 tons under construction, including 10,000 tons/year of tetrahydrophthalic anhydride, 10,000 tons/year of hexahydrophthalic anhydride, 21,000 tons/year of methyltetrahydrophthalic anhydride, 5,000 tons/year of methylhexahydrophthalic anhydride, 2,000 tons/year of nadic anhydride and 2,000 tons/year of methylnadic anhydride. Another 3,000 tons/year for hydrogenated bisphenol A and 200 tons/year for electronic chemicals are under construction. Construction is expected to be completed in 2023. A number of production capacities under construction provide support for the company's long-term development.

Risk warning: Production capacity construction progress falls short of expectations, demand for downstream applications falls short of expectations, and raw material prices fluctuate.