Event: on July 14, the company issued a half-year performance forecast for 2023. The company expects to achieve a return net profit of 634.28 million yuan from January to June 2023, down 93.13% to 91.61% compared with the same period last year. The non-net profit is 347.50 million yuan, down 96.00% to 95.11% over the same period last year.

2023Q2 performance is under pressure, and operating indicators are improving in July. The company expects to achieve a net profit of 634.28 million yuan in 2023, a decrease of 93.13% to 91.61% over the same period last year, and a deduction of 347.50% to 4.2473 million yuan, a decrease of 95.11% over the same period last year. Of this total, 2023Q2 achieved a net profit of-21.0572 million yuan to-19.6477 million yuan, down 177-172% from the previous month and 142-139% from the same period last year; deducting Fei from-23.2417 million yuan to-22.4694 million yuan, down 187-184% from the previous month, down 148-147% from the same period last year. The main departments are: 1) the decline in product prices and sales volume of traditional pesticide intermediates business under the shrinking market demand and intensified competition in the industry; 2) the decrease in raw material prices is less than that of product prices resulting in inventory loss; 3) trial production projects such as fluorobenzene, DFBP and other 23Q2 have not yet achieved sales but the cost has increased significantly; 4) domestic and foreign marketing development of new products has led to an increase in management expenses and sales expenses compared with the same period last year. As the prices and sales volume of related products stopped falling and stabilized in late June, various operating indicators began to improve gradually in July.

The proposed / under construction is rich in capacity, waiting for the new project to be released. In the first half of 2023, the company has completed 5000 tons of fluorobenzene, 5000 tons of DFBP project has been completed and trial production, 5000 tons of 1234ZE project has been completed and started trial production in July; DEX project, 2pyrine 5-trifluorophenylacetic acid and other projects began to sell gradually in the second half of 2023; 5000 tons of sodium hexafluorophosphate project, 10000 tons of 1233ZD project is under construction. With the continuous expansion of the proposed / under construction projects, fluorinated special monomers, sodium salts and fourth-generation refrigerants are expected to contribute to new profit growth points.

Investment advice. From 2023 to 2025, the company is expected to earn 0.60,1.48,2.15 yuan per share, corresponding to PE of 27,11 and 8 times, respectively. Based on the fact that the company has completed the layout of the whole industry chain of fluorite-hydrofluoric acid-fluorine fine chemicals, and continued to replenish the chain, strong chain and extended chain, relying on years of deep technical accumulation, actively expand large items of new energy and refrigerants, rich in / proposed projects, rapid development momentum, maintain the "buy" rating.

Risk tips: project progress is not as expected; downstream demand is lower than expected; raw material price fluctuation risk; product price fluctuation risk.