Event: the company released the 2023 interim report, the first half of the income achieved 464 million yuan, year-on-year-22.1%, to achieve a net profit of 23 million yuan, year-on-year-74.8%, realizing EPS 0.11 yuan. The income of single Q2 was 230 million yuan,-29.2% year-on-year, and the net profit was 8 million yuan,-84.2% compared with the same period last year.

The first half of the year performance under pressure, polyetheramine profits fell sharply. In the first half of the year, the company achieved an income of 464 million yuan, a year-on-year income of-22.1%, and a net profit of 23 million yuan, a year-on-year profit of-74.8%. From the perspective of business, surfactant realized revenue of 360 million yuan, year-on-year-17.2%, gross profit 590 million yuan, gross profit 16.1%; flame retardant revenue 60 million yuan, year-on-year-40.6%, gross profit 7.58 million yuan, gross profit 12.9%; silicone rubber realized revenue of 40 million yuan, year-on-year-29.1%, gross profit 8.24 million yuan, gross profit 21.2%. The performance decreased compared with the same period last year, mainly due to the economic downturn at home and abroad and the intensification of competition in the industry. The selling price and gross profit margin of most of the company's products were lower than the same period last year.

According to Baichuan Yingfu, the average price of polyetheramine, the company's main product, was 21000 yuan / ton at the beginning of 2023. By the end of June 2023, the average price of polyetheramine was 20000 yuan / ton, down 4.8% from the beginning of the year. The average price in the first half of the year was 20195.1 yuan / ton, which was-41.2% of the same period last year. From the cost side, the cost of polyetheramine rose in 2023, the stack price was weak, and the gross profit fell by more than 70% compared with the same period last year. From the perspective of polyetheramine inventory, the overall inventory in the first half of the year is on the high side. By the end of June 2023, the industry inventory was 9700 tons, + 193.9% compared with the same period last year, but there has been a significant decline in inventory since July.

Continue to develop polyetheramine field to consolidate the leading position of wind power materials. The company has two production bases, Yangzhou Chenghua and Huaian Chenghua. Huaian Chenghua is the most important production base of the company. the current annual output of 81000 tons of new materials (20000 tons / year natural surfactant alkyl glycosides, 36000 tons / year special polyether, 20000 tons / year phosphorus series flame retardant, 5000 tons / year special polyurea paint) project. On September 26, 2021, Chenhua announced that Huaian Chenghua and Huaian Investment Promotion Bureau signed the "Cooperation Framework Agreement for Huaian Chenhua New Materials Co., Ltd., with an annual production capacity of 40, 000 tons of polyetheramine and 42000 tons of polyether." it is proposed to build a project with an annual production capacity of 40, 000 tons of polyetheramine and 42000 tons of polyether. In November 2022, the company announced that the proposed site of Jiangsu Dajiang annual production capacity of 34000 tons of polyurethane functional auxiliaries project and Huaian Chenghua annual production capacity of 40,000 tons of polyetheramine (42000 tons of polyether) project would be merged. After the completion of the expansion project, Chenghua will have a production capacity of 71000 tons of polyetheramine, second only to Zhengda's new material capacity of 75000 tons, and the leading position of wind power curing agent is stable.

Profit forecast and investment advice. It is estimated that the EPS from 2023 to 2025 will be 0.72,0.99,1.95 yuan respectively, and the corresponding dynamic PE will be 16 times, 11 times and 6 times respectively. Give the company a valuation of 16 times in 2024, corresponding to the target price of 15.84 yuan, and give a "buy" rating for the first time.

Risk tips: product price decline risk, capacity release less than expected risk, downstream demand lower than expected risk.