A leader in the domestic wood activated carbon industry, with a domestic market share of over 30%: the company focuses on R&D and sales of chemical products such as activated carbon, sodium silicate (water glass), silicone, etc., and has established close cooperation with chemical giant Evonik Industrial Group. We estimate that the company's domestic wood activated carbon market share in 2021 was 31.94%, and the company is steadily expanding production capacity in mature markets. We expect that its market share may continue to increase steadily. At the same time, the company began to gradually lay out the hard carbon anode business for sodium-ion batteries in 2023, which is expected to open up new growth space.

Actively lay out the anode hard carbon material market, opening up a second growth curve: the anode hard carbon material market gradually appeared along with the rise of the sodium-ion battery market. The company's wood activated carbon treatment technology is basically compatible with advanced anode hard carbon manufacturing technology, and has obvious advantages in carbonization and purification processes.

We expect the company to ship approximately 0.08/0.60 million tons of anode hard carbon materials in 2023-2024, contributing to revenue of 0.45/360 million yuan respectively, accounting for 1.93%/11.58% of total revenue respectively, opening up a second growth curve for the company.

The wood activated carbon business is developing steadily, and the white carbon black business is gradually moving downstream with high gross profit: the wood activated carbon market where the company is located is a mature market, and the leading position combined with stable expansion of production capacity ensures a steady increase in the company's wood activated carbon market share. We expect the company's market share to rise to more than 35% in the next three years; although the white carbon black business is in the process of increasing industry concentration, market profitability is weak, and gross margin is stable at around 11%. The company is actively adding downstream silicone business and broadening the industrial chain. The gross margin of the new business is about 30-35%. We expect 2023-2024 to contribute 298/430 million yuan to revenue respectively, accounting for 12.79%/13.84% of total revenue respectively.

Investment suggestions: The company's wood activated carbon market share is stable, actively introducing high-margin businesses such as silicone, etc., and the sodium-ion battery hard carbon anode business is gradually being introduced into the market. We expect the company to achieve operating revenue of 19.37/23.30/3.108 billion yuan in 2022-2024, and Guimu's net profit of 2,16/274/426 million yuan, corresponding to PE of 29.24/23.08/14.85 times, respectively, with initial coverage and a “increase in holdings” rating.

Risk warning: production capacity construction falls short of expectations; downstream demand falls short of expectations; market volume of sodium-ion batteries falls short of expectations.