The company published its 2022 annual report and 2023 quarterly report. In 2022, the company achieved revenue of 8.316 billion yuan, +17.86% year on year; net profit returned to the mother was 881 million yuan, -24.43% year on year. 2023Q1 achieved revenue of 1,461 million yuan, or -17.50% year on year, and achieved net profit of 0.08 billion yuan to the mother, -98.22% year on year.

Dimethyl carbonate series: Product prices have declined, and performance has declined year-on-year. Affected by the increase in terminal consumption in 2022, the overall market demand performance of carbonate solvent products was relatively good throughout the year, but due to the continuous expansion of production capacity in the industry, prices declined from a high level. The company actively deployed overseas markets, formed multiple bases for collaborative production, enhanced the company's stable supply capacity, and achieved sales volume of dimethyl carbonate series products of 661,000 tons, +39.62% year on year; revenue of 3,936 billion yuan, -3.26% year on year, gross profit of 1,278 billion yuan, or -37.67% year on year.

Methyl tert-butyl ether series: Export demand was strong, and gross profit increased year-on-year. Affected by the Russian-Ukrainian conflict in 2022, the price of methyl tert-butyl ether rose to an all-time high. The price of methyl tert-butyl ether gradually fell back to a low level of consolidation in the second half of the year due to the decline in export dividends and crude oil fluctuations. The company achieved sales of 188,800 tons of methyl tert-butyl ether series products, -43.76% year on year; revenue of 1,246 million yuan, -20.30% year on year, and gross profit of 94 million yuan, +9.99% year on year.

The construction of new projects is progressing steadily, and it is expected that they will contribute incrementally in the future. In terms of electrolytes, the 300,000 tons/year electrolyte plant at the Dongying base has entered the normal production stage; the 100,000 tons/year liquid lithium salt project and the 11,000 tons/year special additive project are scheduled to be completed within 2023; construction of the 200,000 ton electrolyte project and 220,000 ton carbonate project at the Wuhan base has begun, and the construction of the 200,000 ton electrolyte project at the Leshan base is progressing steadily according to the planned construction schedule. In terms of lithium battery anode materials and wet electronic chemicals for semiconductor auxiliary materials, the 1000 tons/year silicon-based anode production line stably produces high-efficiency carbon silicon-based anode materials. The 30,000 tons/year silicon-based anode project at the Meishan base, 20,000 tons/year cathode lithium supplement (phase I), and the 10,000 tons/year novel conductive agent project are scheduled to be completed in 2024.

Investment advice. The company has many lithium battery material projects under construction, and performance is expected to continue to grow as production capacity is released in the future. We expect Shenghua New Materials EPS to be 4.69, 6.53, and 9.82 yuan respectively from 2023 to 2025.

Referring to the valuation level of comparable companies, they were given 17-19 times PE in 2022, and the corresponding reasonable value range was 79.73-89.11 yuan, maintaining the “superior market” rating.

Risk warning. The progress of projects under construction fell short of expectations, downstream demand fell short of expectations, and project approval progressed slowly or could not be passed