Event 1: on April 23, 2022, the company released its annual report for 2021, saying that in 2021, the company achieved operating income of 1.193 billion yuan, an increase of 32.5% over the same period last year; net profit of 155 million yuan, an increase of 12.7% over the same period last year; and non-net profit of 141 million yuan, an increase of 13.8%. The revenue of the company's three major categories of products has increased, among which the growth rate of flame retardants is larger.

Event 2 on April 23, 2022, the company released a report on the first quarter of 2022, showing that the company achieved 273 million in operating income in the first quarter, down 10.3% from the same period last year; the net profit returned to the mother was 41 million yuan, down 18.0% from the same period last year; and the non-net profit deducted from the mother was 39 million yuan, down 14.3% from the same period last year. The company lost 5.495 million of its non-operating expenses due to the shutdown of some production lines in Huaian Chenghua, an increase of 6138.4% over the same period last year. Due to the shutdown of some production lines and the influence of COVID-19 epidemic, the production and sales of the company did not reach the same period last year, resulting in a year-on-year decline in operating income and net profit.

With the establishment of an international trading company, overseas revenue has increased significantly: the company has paid more and more attention to overseas markets and established a wholly-owned subsidiary Shanghai Chenhua International Trading Co., Ltd. in December 2021, which is responsible for the export of related products and the development of foreign markets. The company achieved overseas market revenue of 200 million yuan in 2021, an increase of 117.4% over the same period last year. All the products of polyetheramine, alkyl glycosides and the main export products of flame retardant plate have been certified by EU, and the solar photovoltaic module sealant has been demonstrated by American UL and has the qualification to carry out related product sales business in Europe and the United States. With the vigorous development of global renewable energy, the overseas market prospect of the company's products is promising.

Capacity expansion is in line with the wind power boom, and the restraining value of sudden shutdowns is reflected: according to CWEA statistics, the hoisting of wind turbines in China reached a new high in 2021, with 15911 new units installed nationwide (except Hong Kong, Macao and Taiwan), with a capacity of 55.92GW, an increase of 2.7% over the same period last year. The demand for fan blades is strong, and the price of polyetheramine remains high throughout 2021. We estimate that the national average annual installed capacity will still reach 55-60GW from 2022 to 2024. The rhythm of the company's new production capacity is in line with the wind power demand, and the company's new annual production line of 10000 tons of polyetheramine was installed and commissioned and put into trial operation on August 30, 2021. However, production was suspended on September 22 due to the shortage of power supply in Jiangsu (23000 tons of the whole line). After resuming production on October 8, the whole line was shut down on November 1 due to hydrogen peroxide leakage accidents of other companies in the park. The company's new production capacity has not been effectively released, the annual production of surfactant products only increased by 4% compared with the same period last year, and sales only increased by 6.4% compared with the same period last year. Thanks to the increase in product prices, revenue from this part of the product increased by 22.6%. In the context of the rapid development of wind power, the contribution of new production capacity to sales growth is expected to be realized.

Shanghai's epidemic situation blocked the market, and epidemic prevention did not forget to promote the resumption of production: as a key link of many industrial chains and an important port of foreign trade, Shanghai has had a great impact on many industries since it entered the state of epidemic control in mid-March. Due to the shutdown of customers in Shanghai, the export trade is not smooth, the company's production and sales have been significantly affected, with the orderly resumption of production in Shanghai, the company's production and sales are expected to gradually improve. The resumption of work and production in Huaian Industrial Park is also advancing in an orderly manner. Shi Zhijun, mayor of Huaian, investigated and studied the work of ensuring safety and operation in the park on April 17, 2022, requiring both epidemic prevention and control and production safety. Fuqiang New Materials Company, which had an accident last year, has resumed work and production (except Class A raw material production line), and Huaian Chenghua is fully prepared to wait for the park to resume production instructions at any time.

Non-operating expenses increased greatly, and shutdown losses dragged down the single-quarter net profit: the company's non-operating expenses in the first quarter was 5.495 million, mainly due to the temporary shutdown loss of some production lines in Huaian Chenghua, compared with 88000 yuan in the same period last year. The company's first-quarter operating profit was 50.69 million yuan, only 6.8% lower than the same period last year, while the company's net profit was 18% lower than the same period last year.

Profit forecast and investment advice: under the guidance of the double carbon strategy, the development of scenic energy is booming, and the demand for raw materials remains strong. We expect that from 2022 to 2023, the supply and demand of polyetheramine will be tight and the price will fluctuate at a high level, and the company is expected to realize its value soon after the full resumption of production. From 2024, if the industry's production capacity is gradually released, the price of polyetheramine is expected to decline gradually; with the company's expansion of overseas markets, sales of other products are expected to increase steadily. We estimate that the operating income from 2022 to 2024 will be 16.69, 20.63 and 2.488 billion yuan, respectively, an increase of 39.9%, 23.6% and 20.6% over the same period last year, with a corresponding EPS of 1.49 Universe 2.05 and PE of 9x, 6x and 6x.

Risk tips: vicious intensification of industry competition; repetition and expansion of epidemic situation; risk of industry policy change; hindrance of product export and international trade protection in overseas markets.