Event: on August 19, the company released a mid-2023 report that the company's operating income was 565 million yuan, down 48.38% from the same period last year, and the total profit was 79 million yuan. The net profit attributed to shareholders of listed companies was 71 million yuan, down 82.60% from the same period last year. Net profit that is not attributable to shareholders of the parent company is 38 million yuan, down 90.86% from the same period last year.

The intensification of competition in the industry continues unabated, and the results in the second quarter are under further pressure. In the first half of 2023, under the double impact of supply-side and demand-side, the competition in the industry further intensified. 2023Q2, the company's revenue was 282 million yuan, down 49.90% from the same period last year, and the total profit was 33 million yuan. The net profit belonging to the shareholders of the listed company was 31 million yuan, down 86.06% from the same period last year. The net profit deducted by non-parent shareholders was 5 million yuan, down 97.67% from the same period last year, and the gross profit margin was 11.05%, down 39.31 pcts from the same period last year, 8.45 pcts from the previous year, 10.82% from the previous year, 28.13 pcts from the same period last year, and 3.53 pcts from the previous year.

The poor half-year performance is mainly due to the further decline in the price of core products. 2023H1's core products aminosilane, epoxy silane, sulfur-containing silane, vinyl silane and orthosilicate have achieved sales of about 3988, 2549, 3099, 4651 and 5030 tons respectively, and revenue of 1.1,0.84,0.62,0.79 and 65 million yuan respectively. Affected by the prosperity of the industry, the sales unit price of the company's core products decreased, and the average prices of aminosilane, epoxy silane, sulfur-containing silane, vinyl silane and orthosilicate H1 were 26620, 33012, 19864, 17021 and 12917 yuan / ton, respectively, down 59.83%, 57.46%, 36.69%, 50.86%, 30.79%, respectively.

The construction of the project is carried out in an orderly manner and is optimistic about the layout of the whole industrial chain of the company for a long time. In the first half of 2023, the company actively promoted the construction and operation of various projects. Some of the products in the company's "annual output of 65000 tons of silicone new material technology expansion project" and "annual output of 23000 tons of special silicone material project" have been in the stage of trial production. The "functional silane project with an annual capacity of 300000 tons" built in Tongling, Anhui Province, is currently in a state of comprehensive construction, which mainly relies on the advantages of existing technology and new product development. it will further expand the production capacity of the company's functional silane products and the production of new products, ensure product production stability and reduce operational risks, so as to consolidate the company's position in the industry. The "annual production capacity of 300000 tons of silicon-based and aerogel new materials project" invested by the company in Ningxia Zhongwei Industrial Park has been in a state of comprehensive construction and strives for the first phase of the project to reach trial production conditions by the end of 2023. The company plans to invest in the construction of "210000 tons of silicon-based new materials and 5000 tons of cobalt-based new materials" project in Hukou High-tech Industrial Park, Jiujiang City, Jiangxi Province, which is in the early stage of examination and approval, and the company will rely on this project to further expand the layout of the whole production chain.

Investment advice: affected by the decline in product prices, we have adjusted the company's performance forecast. It is estimated that the company's earnings per share in 2023-2025 will be 0.84,1.15 and 1.45 yuan respectively, corresponding to 18,13 and 10 times PE respectively. In the long run, we are still optimistic about the company's cost advantage and maintain the "buy" rating.

Risk hint: downstream demand is lower than expected, product price fluctuation risk, production expansion project schedule is not as expected.