Q2's earnings continued to be under pressure. It was announced that Indonesia's alkali and glyphosate project maintained that the “buy” rating company released its 2023 semi-annual report. 2023H1 achieved revenue of 4.09 billion yuan, -45.3%; net profit attributable to the mother was 6.2 billion yuan, -76.6%; net profit deducted from non-net profit of 590 million yuan, -77.4% year-on-year, -77.4%; corresponding to Q2 revenue of 1,696 billion yuan, -61.4%, +5.37%; net profit deducted at -86.2%, -44.5% from the previous year; deducted non-net profit of 1.96 billion yuan 100 million yuan , -87.7% YoY and -50.5% YoY, profit is under pressure. Considering the decline in the boom in products such as alkali, diglyphosate, and glyphosate, we lowered our profit forecast. We expect net profit from 2023-2025 to be 15.10, 13.46, and 1,788 billion yuan (original value 29.81, 30.52, 34.24). The corresponding EPS is 0.17, 0.15, 0.20 yuan/share, and the current stock price corresponding to the 2023-2025 PE is 14.0, 15.7, and 11.8 times. The downturn in the main business climate has put pressure on the company's profits in the short term. According to the plan, the company will expand existing advantageous industries, help high-quality development, and maintain its “buy” rating.

Prices of alkali, diglyphosate, and glyphosate fell year-on-year and month-on-month. According to Baichuan Yingfu data, the average market price of heavy soda ash, ammonium chloride, diglyphosate/methionine in 2023H1 was 2,756/936/20,231/34,849/17,817 yuan/ton, -1.5%/-26.7%/-48.5%/-48.5%/-49.0%/-16.5%; the average price for 7-August 2023 was 2,320/6318,4633,17,182 yuan/17,182 yuan /ton. By business, 2023H1 sold 90.9/51/43,000 tons of alkali, pesticides and intermediates, nutrients and intermediates, etc., with revenue of 171/6.2/160 million yuan, year-on-year, -16.27%/+7.15%/+4.67%; the average sales price was 1,883/12,259/3,727 yuan/ton, +3.26%/-61.86%/-18.77%, the average price of 2023Q2 was -4.38%/-67.78%/-17.90%; the market for main products declined from the same period As a result, profits were under pressure. 2023H1's gross sales margin and net profit margin were 23.61%/14.74%, respectively, compared to 19.24/-14.48pcts at the end of 2022.

It is planned to invest in the construction of a co-alkali and glyphosate project in Indonesia, expand existing advantageous industries, and help the high-quality development company sign a “Conditional Land Sale Agreement” with BKMS, the operator and manager of Indonesia's Surabaya Java Integrated Industrial and Port Area (JIIPE), to provide project land for the company to invest and build 600,000 tons of sodium carbonate, 600,000 tons of ammonium chloride, and 200,000 tons of glyphosate projects in JIIPE. The total investment for this Indonesian project is about 800 million US dollars. The company also agreed with AKR Indonesia (AKR's subsidiary holds 60% of the shares in BKMS) to establish a joint venture in JIIPE as the main body of the project. Among them, the company and AKR hold 90% and 10% of the shares respectively.

Risk warning: Product and raw material prices fluctuate greatly, project progress falls short of expectations, safety and environmental risks, etc.