What happened: on August 11, the company released its semi-annual report of 2023. In the first half of 2023, the company realized revenue of 1.194 billion yuan, a decrease of 13.6% over the same period last year, and a net profit of 132 million yuan, an increase of 28.68% over the same period last year. The net profit of non-return was 131 million yuan, an increase of 40.73% over the same period last year. Profitability benefited from the downward repair of raw material cost pressure. In the second quarter, the gross profit margin / net profit margin in the second quarter was 25.71% and 11.66%, an increase of 1.86 pct over the first quarter, and an increase of 9.62 pct over the previous year.

The construction glue is always strong, and the industrial glue continues to grow. According to SMM quotation data, the price of DMC and 107 glue, the main raw materials upstream of the company, has fallen to 14,000 yuan / ton, about 17.6% lower than at the beginning of the year and 64% lower than last year's high of about 39,000 yuan / ton. The decline in the price of raw materials led to a decline in product prices and affected the scale of income. In the first half of the year, the revenue of construction rubber / industrial rubber was 774 million yuan / 293 million yuan respectively, a decrease of 9.51% / 3.81% compared with the same period last year, but the product gross profit margin was also significantly repaired. In the first half of the year, the gross interest rates of construction glue / industrial rubber were 25.08% and 27.6% respectively, an increase of 13.3 pct over the same period last year.

In terms of shipments, the company gives full play to the leading position and brand advantages of the construction glue industry, and benefits from the further improvement of the industry concentration, the upgrading of the decoration industry and the implementation of the urban renewal plan, to achieve a 19.37% increase in the sales weight of construction glue, and a continuous increase in market share. Industrial adhesives have maintained rapid growth in the fields of photovoltaic solar energy, power cells, automobile manufacturing, electronics and appliances, among which the photovoltaic sector has increased its market share in leading enterprises such as Longji, Jingao, Zhengtai, Central, Haitai, and so on. Power cells, automotive electronics, in-depth expansion in BYD, Ningde era, polyfluorodo, Scud and other well-known enterprises, the overall industrial glue sales weight increased by 33.87% compared with the same period last year.

The fund-raising project was carried out smoothly, and the silicon-carbon negative electrode production line was completed and put into production. In terms of projects under construction, the company raised and invested 100,000 tons / year high-end sealant intelligent manufacturing project to add 30,000 tons / year silicone sealant production capacity, forming 210,000 tons / year high-end silicone material production capacity, providing strong support for the company's performance growth.

In addition, the Anhui Sibao 8500 tons / year silane coupling agent technical renovation project, a wholly owned subsidiary of the company, has been promoted as planned, and the 6000 ton / year production capacity has been completed in the first half of this year, and all the projects are expected to be completed and put into production by the end of 2023. In terms of new products, Sibao New Energy, a wholly owned subsidiary of the company, has completed the construction of the main part of the project of silicon-carbon anode materials and special adhesives for lithium batteries in 2023H1, and is expected to be completed in 2023Q3 infrastructure and equipment installation will begin in 2023Q4. The company built a new production line of 1000 tons / year silicon-carbon negative electrode for power battery, which was completed and put into production in April 2023. The completion of this project is convenient for the company to carry out the testing and certification of silicon-carbon anode materials for power batteries and the smooth implementation of the project of 50,000 tons / year silicon-carbon anode materials and special adhesives for lithium batteries, so as to open up a new growth path for the company.

The release of the draft restricted stock incentive plan in 2023 demonstrates the company's confidence in its development. The company intends to grant 6.96 million restricted shares to the directors, senior managers and core technical (business) backbones of the company (including holding subsidiaries) at a price of 8.26 yuan per share, accounting for about 1.78% of the company's total share capital at the time of the announcement of this draft incentive plan, with no reserved interest. The performance appraisal year is three fiscal years from 2023 to 2025, the annual performance evaluation target is based on the performance in 2022, and the growth rate of revenue / net profit is not less than 20%, 44%, and 72.8%.

Investment suggestion: combined with the price trend of raw materials, products and downstream demand, the company's profit forecast is lowered. It is estimated that the company's operating income from 2023 to 2025 will be 3.066 billion yuan, 3.591 billion yuan and 4.266 billion yuan respectively. The net profit of returning to the mother was 339 million yuan, 437 million yuan and 552 million yuan respectively, up 35.3%, 29.1% and 26.2% respectively over the same period last year. The corresponding EPS is 0.87,1.12 and 1.41 respectively, and the corresponding PE multiple of the current stock price is 20x, 15x and 12x respectively, maintaining the company's "buy" rating.

Risk tips: capacity expansion is not as expected; industry competition is intensified; downstream demand is not as expected; raw material price fluctuation risk and so on.