Events:

According to the company's interim report, during the reporting period, the operating income was 1.015 billion yuan, 2.88% over the same period last year, and the net profit returned to the mother was 136 million yuan, an increase of 494% over the same period last year.

Main points of investment

Changde base is the main base of profit growth. As the production of Guixi base stopped at the end of the 19th, the company's main revenue increased slightly compared with the same period last year. However, during the reporting period, the output of thiosulfan, salicylonitrile and other products increased more than that of the same period, and structural changes led to a big increase in net profit compared with the same period last year.

The methanesulfonate in Guixi base is worthy of attention. The company announced at the beginning of the 20th that it planned to invest 484 million yuan in the construction of o-sec-butylphenol, o-isopropylphenol, carbosulfan and 4-TBC production plants in Guixi New area. According to the information released on the local government website, the base has also planned the methanesulfonate project. We believe that the methanesulfonate project has a large market space and broad industrial prospects.

The progress of the new base in Ningxia is in line with expectations. According to the semi-annual report, the Ningxia base is currently conducting the optimization demonstration of the technical scheme and the evaluation of the scheme design, as well as communicating with the local government on the three evaluation, land use and other issues.

Profit forecast and investment rating: the company's operating income from 2020 to 2022 is expected to be 2.494 billion yuan, 2.783 billion yuan and 3.198 billion yuan respectively, the net profit returned to the parent is 251 million yuan, 321 million yuan and 383 million yuan respectively, and the EPS is 0.71 yuan, 0.90 yuan and 1.08 yuan respectively. The current stock price corresponds to 13x, 10x and 9x respectively. Taking into account the company's product categories and capacity reserves are expected to bring sustained growth to the company's performance, maintain the company's "buy" rating.

Risk hint: the comprehensive renovation of the coastal chemical parks in northern Jiangsu is gradually normalized, resulting in a decline in the price of related intermediates; the promotion of methyl pyrimidine is not as expected.