Performance is in line with expectations

The company's income in the first half of the year was 548 million yuan, an increase of 31% over the same period last year, with a net profit of 11.95 million yuan, and a loss of 3 million yuan after deducting non-profit from last year, which is in line with our expectations.

In the first half of the year, the company's main products include 72100 tons of ethylene glycol and 29100 tons of oxalic acid, up 37% and 27% respectively over the same period last year. Sales of ethylene glycol 69700 tons, oxalic acid 25900 tons.

Trend of development

The focus of the company's performance growth in the second half of the year mainly comes from the rapid growth of demand for ethylene glycol and oxalic acid products and strong competitiveness. Globally, the demand for ethylene glycol still maintains a rapid growth trend. In 2013, the global demand for ethylene glycol increased by 12.10% compared with the same period last year to 24 million tons. It is estimated that the global demand for ethylene glycol will exceed 29 million tons by 2018. China's imports of ethylene glycol are gradually increasing, rising by about 3.53 per cent to 8.24 million tons in 2013 compared with the same period last year. In the first half of the year, the sales revenue of ethylene glycol was 364 million yuan, and the gross profit margin of YoY+28%, was 20.14%, an increase of 12.19 ppt over the same period last year.

Oxalic acid profitability continues to improve, the company per ton oxalic acid production cost of 1700 yuan, ton gross profit of about 2500 yuan. Oxalic acid industry belongs to high pollution and high energy consumption industry. With the substantial improvement of domestic environmental protection threshold, small non-standard oxalic acid factories continue to shut down, oxalic acid industry is improving, and the competitiveness of large factories with scale advantages and environmental protection advantages continues to improve.

Profit forecast adjustment

Maintain the company's 15ax 16-year performance forecast, EPS 0.07pm 0.25 yuan unchanged, the current stock price corresponding to 16-year Pamp E 33x.

Valuation and suggestion

Keep the "neutral" rating and the A-share price 9.2 yuan unchanged, the valuation center moved down and the RMB exchange rate depreciated, and lowered the B-share list price to US $0.7, a reduction of 53%, corresponding to 16-year Pmax E 18 times.

Risk

The operating rate of coal to ethylene glycol is unstable, and the private additional issuance scheme is not feasible.