Event: the company releases its 2023 half-yearly report. In the first half of 2023, the company achieved revenue of 4.304 billion yuan, an increase of 6.50% over the same period last year, a net profit of 503 million yuan, an increase of 1.94% over the same period last year, and a net profit of 499 million yuan, an increase of 2.46%. Of this total, 2023Q2 achieved a revenue of 2.246 billion yuan in a single quarter, an increase of 2.67% over the same period last year, an increase of 9.16% over the same period last year, and a net profit of 275 million yuan, an increase of 1.58% and 20.65% over the same period last year.

Comments:

The volume of high-end manufacturing chemical materials increased, and cost control was strengthened. 23H1's performance was in line with expectations in the first half of 2023, and the company's gross profit of the high-end manufacturing chemical materials sector increased by 8.7% compared with the same period last year. Among them, the company's sales of polyurethane products, special coatings, nitrogen trifluoride, rubber sealing profiles, organic transparent materials and other products increased by more than 10% compared with the same period last year. In addition, in terms of carbon reduction business, the company's subsidiary Southwest Hospital carbon reduction business continued to develop, and the efficiency improved significantly. The gross profit of the company's carbon reduction business plate increased by 32.2% in the first half of 2023 compared with the same period last year. In the first half of 2023, the company carried out actions to improve quality and increase efficiency, reduce fees and increase profits. 2023H1, the company's sales expenses and management expenses decreased by 12.51% and 16.31% respectively compared with the same period last year, and the sales expense rate and management expense rate decreased by 0.32pct and 1.45pct respectively. At the same time, the company continues to increase R & D investment to maintain the company's core competitive advantage. 2023H1's R & D expenditure increased by 9.62% year-on-year, and the R & D expenditure rate increased by 0.20pct.

The key production capacity projects have been gradually landed, and the company's overall strength continues to tamp in high-end fluorine materials, with a production capacity of 30,000 tons of fluorinated resin per year, and complete intermediates such as difluorochloroform, tetrafluoroethylene and hexafluoropropene. In addition, the company also has 5500 tons / year fluororubber production capacity, 2500 tons / year PVDF project has also been completed and put into production. At the same time, the company's beach base Zhonghao Chenguang 26,000 tons / year high-performance organic fluorine material project has entered a critical construction period. In terms of electronic chemicals, Haohua Gas 4600 tons / year electronic gas project has been completed and put into production, and the company's existing production capacity of fluorine-containing electronic gas ranks among the top three in China. In terms of other projects, industrialization projects such as 100,000 civil aviation tires per year, Southwest Hospital Clean Energy Catalytic material industrialization Base Project and Northwest Hospital silicone sealed profile Project are stepping up construction, and the above projects are expected to be completed and put into production by the end of 2023. After the production capacity of the above projects is fully released, the company will further improve its overall strength in the four major businesses of aviation chemical materials, high-end fluorine chemical materials, electronic chemicals and carbon emission reduction.

It is proposed to acquire 100% equity of Sinochem Lantian and raise supporting funds, and the company plans to purchase 52.81% and 47.19% of its shares held by Sinochem Blue Sky from Sinochem Group and Sinochem Asset issuance shares respectively, with a transaction price of about 7.244 billion yuan and a corresponding number of 195 million shares per share. After the completion of this transaction, Sinochem Blue Sky will become a wholly owned subsidiary of the listed company.

In addition, the company plans to raise supporting funds from no more than 35 qualified specific investors, including China Foreign Economic and Trade Trust Co., Ltd., and Sinochem Capital Innovation Investment Co., Ltd., with a total amount of no more than 7.244 billion yuan. The matching funds raised will be used for the construction, replenishment of working capital or debt repayment of projects such as "New 20,000 tons / year PVDF Project" and "200000 tons / year Lithium Ion Battery electrolyte Project (Phase I)".

The acquisition of Sinochem Blue Sky by Haohua Technology, on the one hand, is a deep integration of Sinochem's fluorine chemical related assets, which is conducive to optimizing Sinochem's internal business structure and improving the allocation and operational efficiency of state-owned assets. On the other hand, listed companies are mainly engaged in high-end fluorine materials, electronic chemicals, high-end manufacturing chemical materials and carbon emission reduction business. There is a big difference between the main products of listed companies and Sinochem Blue Sky. The acquisition of Sinochem Blue Sky will enable listed companies to have business lines of refrigerants and other related products, so as to improve the layout of the existing fluorine chemical industry chain of listed companies. enhance the overall synergy of listed companies, and enhance the competitiveness of listed companies in the fluorine chemical industry. In addition, this transaction also intends to raise matching funds for Sinochem's blue sky project construction, which will further enhance the enterprise's product production capacity or broaden the enterprise's product layout.

Earnings forecast, valuation and rating: 23H1's performance has grown steadily in line with expectations, benefiting from the increase in volume and profit in the company's high-end manufacturing chemical materials sector, as well as the control and optimization of sales and management expenses. We maintain the company's 23-24 profit forecast and add 25-year profit forecast. It is estimated that the net profit of the company from 23 to 25 will be 1.504 $1.532 billion respectively. The company continues to promote the landing of existing key production capacity projects, which will further consolidate the comprehensive strength of the company's existing business. At the same time, after the completion of the acquisition and fund-raising projects for Sinochem Blue Sky, the company's industrial chain layout in the fluorine chemical industry will continue to improve, greatly enhance the company's competitiveness in the fluorine chemical industry, and maintain the "buy" rating.

Risk tips: lower-than-expected demand, product and raw material price fluctuations, capacity construction risk, asset restructuring landing risk.