Events:

On August 27, the company released a semi-annual performance report. In the first half of 2023, the company realized operating income of 628 million yuan, an increase of 22% over the same period last year. It realized a net profit of 143 million yuan, an increase of 21% over the same period last year, and a net profit of 139 million yuan, an increase of 18% over the same period last year.

The performance is in line with our expectations, the gradual realization of the benefits of recycled and new materials projects benefits from the fact that in recent years, the company has continuously developed a complete set of process solutions such as high-quality nylon 6binder 66 spinning, recycled nylon, food-grade recycled polyester and other process solutions have achieved good marketing results, the company achieved year-on-year growth in the first half of the year, and the profit margin has improved. 23H1 achieved a gross profit margin / net profit margin of 39% and 25%, year-on-year + 2pct/+1pct. In a single quarter, 23Q2 achieved a net profit of 75 million yuan, an increase of 27% over the same period last year and 10% over the previous quarter. The performance in the second half of the year is expected to continue to improve as the economy recovers.

Adiponitrile localization breakthrough, the company is expected to fully benefit from the nylon 66 expansion tide adiponitrile localization breakthrough triggered nylon 66 expansion enthusiasm, will bring more than 20 billion yuan of engineering and technical service market. The company has covered the whole industry chain from caprolactam and nylon 6hamp66 polymerization to nylon 6hamp66 spinning, and is expected to fully benefit from this industrialization wave.

Under carbon tariffs and de-globalization, the recycling business of corporate layout welcomes opportunities for important industries. In May 2023, the bill on carbon border adjustment mechanism was passed in the European Parliament, which means that climate regulation will be formally incorporated into global trade rules for the first time. The company's waste plastic recycling industry ushered in a good opportunity to accelerate development.

In the first half of the year, the company's recycled materials and biodegradable materials business achieved revenue of 220 million yuan, an increase of 72% over the same period last year, further supporting the accelerated development trend of the industry.

During this period, the company and Japan C-PET company cooperation in Asia's largest monomer investment in Asia's largest food-grade recycled rPET project successfully implemented; the company and Taihua new materials subsidiary Jiangsu Jiahua signed the chemical method recycled nylon material project has gradually recognized revenue, is expected to be delivered in 2023; in addition, the company successfully signed the first single-line annual production of 40,000 tons of Lyocell fiber project, a single-ton investment advantage is obvious. The company's green recycling business has obvious advantages and broad space.

Earnings forecast, valuation and rating

We estimate that the company's income in 2023-25 will be 100 million yuan respectively, with a corresponding growth rate of 24%, 25%, 31%, 30,000,000, 380,000,000, and 23%, respectively, respectively. The corresponding growth rate will be 23%, 28%, 38%, and 0.93, respectively, and the CAGR for 3 years will be 30%. In view of the fact that the company has mastered the core technology of polymer product upgrading and has more advanced solutions in the nylon, recycling and biodegradable industries, with reference to the comparable company valuation, we give the company 20 times PE in 24 years, with a target price of 23.8 yuan, maintaining a "buy" rating.

Risk hint: the benefit of the demonstration project is lower than the expected risk, the market development is less than expected risk, the core technology leakage risk, low-carbon environmental protection policy turn risk