From January to June 2009, the company achieved operating income of 248 million yuan, down 7.13% from the same period last year; operating profit was 4.51 million yuan, down 78% from the same period last year; total profit was 6.59 million yuan, down 68.1% from the same period last year; net profit belonging to the owner of the parent company was 5.7 million yuan, down 68.05% from the same period last year; basic earnings per share is 0.03 yuan.

The leader of nitrocellulose in the world, the voice of the international market is constantly strengthened: the company currently has an annual production capacity of 49,000 tons of H-type nitrocellulose, L-type nitrocellulose and energetic nitrocellulose. It is able to produce more than 70 different specifications of nitrocellulose products, with a domestic market share of 42.6% in 2007, ranking first in the world for many years. In recent years, the company has been in constant contact with the international industry and downstream customers by participating in intra-industry meetings, and has established a good image in the industry; through EU REACH pre-registration, the company has ensured its normal trade activities with the EU in the next 10 years.

The production and marketing of the main products are normal, and the reduction of product profit margin affects the performance in the first half of the year: the company sold 19350 tons of nitrocellulose in the first half of the year, an increase of 4.71 percent over the same period last year, and 1997 tons of refined cotton, an increase of 670 percent over the same period last year. The comprehensive gross profit margin was 20.94%, down 1.65 percentage points from the same period last year. Among them, the gross profit rate of H-type nitrocellulose was 19.83%, which was the same as that of the same period last year; the gross interest rate of L-type nitrocellulose was 35.76%, down 12.77 percentage points from the same period last year.

Due to the international financial crisis, overcapacity makes the market competition more and more fierce, the price of products continues to decline, and the company's sales volume increases, but the decline in operating income further confirms this phenomenon. At the same time, the prices of raw materials such as cotton cashmere and nitric acid declined in the first half of the year, but the gross profit margin of the company's products decreased due to the sharp rise in fuel and power prices. The continuous reduction of the profit space of nitrocellulose products has led to a big drop in the company's net profit in the first half of the year compared with the same period last year.

It may become a major shareholder specialty chemicals integration platform. The company is the only listed company of special chemicals under China Arms Industry Corporation, and may become an integration platform for major shareholders of special chemicals assets in the future.

Earnings forecast and investment rating: the company's earnings per share from 2009 to 2011 are expected to be 0.13,0.22,0.23 yuan respectively, corresponding to the dynamic price-to-earnings ratio of 100,60 and 58 times. As the current stock price already reflects the company's performance, we maintain the company's "neutral" investment rating.