1H23 performance meets market expectations

China Catalyst announced 1H23 results: revenue was 237 million yuan, down 27.8% from the same period last year; net profit from home was 39 million yuan, corresponding to 0.22 yuan per share, down 48.1% from the same period last year, in line with market expectations. The decline in company profits is mainly due to the reduction of orders downstream of mobile source denitrification molecular sieves. 1H23 confirmed that the share payment fee was 13 million yuan, excluding 52 million yuan in net profit, down 31% from the same period last year, and 34 million yuan in non-net profit, down 43.6% from the same period last year.

2Q23 achieved a revenue of 114 million yuan, a decrease of 24.3% compared with the previous month by 7.9%; and a net profit of 37 million yuan, down 12% from the same period last year, which was significantly improved compared with the same period last year, mainly due to the confirmation that the revenue from technical services of propylene oxide catalyst led to an increase in profit compared with the previous month, and the gross profit margin of 2Q23 increased by 11/21.7ppt to 53.4%.

Trend of development

The sales volume of mobile source denitrification molecular sieve is under pressure, focusing on the recovery of global heavy truck demand. 1H23 affected by overseas economic weakness, BASF denitrification molecular sieve orders under pressure, looking back, we believe that the recovery of domestic logistics, infrastructure and other industries is expected to bring heavy truck demand recovery, superimposed catalyst product sales region has been expanded from the Asia-Pacific region to the global scope, has achieved sales to Germany, Poland, the United States and South Africa, we think it is expected to drive the company mobile source out-of-stock molecular sieve sales pick up.

Adhere to innovation, continue to develop product applications or research and development of new products to promote growth. The company's HPPO propylene oxide catalyst and process 1H23 has been successfully started by downstream customers. In the long run, on the one hand, the company will increase its R & D investment in new products, including fixed source denitrification molecular sieves, TRH special molecular sieves, VOCs purification catalysts, ethylene glycol synthesis catalysts and other environmentally friendly new material molecular sieves and catalyst products, iron-molybdenum catalysts, nickel-copper catalysts, maleic anhydride catalysts and other metal catalyst products, m-cresol, high-purity alumina, high-purity silica and other fine chemicals On the other hand, actively promote the application expansion of existing molecular sieves in MTO and other fields, in order to seek future performance growth points. We believe that with the gradual completion of the pilot test of the company's new products, customer verification, demonstration plant start-up and other links, it is expected to drive the medium-and long-term growth of the company.

Profit forecast and valuation

Due to the lower-than-expected order volume of BASF mobile source denitrification molecular sieve, the main customer downstream of the company, we reduced the 24-year profit forecast of 2023 plum by 26% to 195 million yuan. The company's current share price corresponds to a price-to-earnings ratio of 23.9 pesos 18.2x in 2023 / 24. Due to the downward revision of earnings forecasts and the downward valuation center of the industry, we have lowered the company's target price by 23% to 27 yuan, corresponding to the 24-year price-to-earnings ratio of 31.8 pound in 2023. The current stock price corresponds to 33% of the rising space, maintaining the "outperform industry" rating.

Risk

The demand for heavy trucks is lower than expected, the customer concentration is high, and the penetration of new energy commercial vehicles is increased.