Event: the company issued the semi-annual report of 2023, during the reporting period, the operating income was 3.207 billion yuan,-18.56% of the same period last year, and the net profit was 326 million yuan, 28.63% of the same period last year. The revenue of Q1/Q2 in a single quarter was 1.576 million yuan, compared with the same period last year, which was + 1.31% compared with the same period last year, of which Q2 was + 3.49%. The net profit of returning to the mother was 147 million yuan, respectively, and 48.81% compared with the same period last year. Among them, Q2 compared with + 21.77%.

The company's operating performance declined in the first half compared with the same period last year and improved in the second quarter compared with the same period last year. In the first half of the year, the macroeconomic recovery was weak, energy prices were high, terminal consumption was depressed, market demand recovered slowly, the prices of the company's main products declined compared with the same period last year, and the price difference between products and raw materials narrowed. According to the average price of wind,2023 in the first half of the year, the average EVA price was 15271 yuan / ton, compared with-33.41%, and the price difference was 8866 yuan / ton, compared with the same period last year.

2023H1 gross profit margin is 16.39%, year-on-year-6.77 pct, net profit rate is 10.32%, year-on-year-1.36pct. Among them, the price of Q2 products has stabilized and rebounded, the company's profitability has been repaired, and its operating performance has improved compared with the previous month. With the introduction of national macro policies, the steady growth of consumption and the pick-up of downstream demand, the gross profit margin of the company's existing main products is expected to rise further, and profitability is expected to be repaired.

The EVA boom cycle is expected to last until 2024. Affected by geopolitics, energy security has become the primary concern of all countries. According to the forecast of China Photovoltaic Industry Association, the new installed capacity of photovoltaic in China is 95-120GW in 2023, the new installed capacity of photovoltaic in China is 100-125GW in 2025, and the new installed capacity of photovoltaic in the world is 324-386GW. As the core main material of photovoltaic film, EVA superimposes a huge import alternative space, and we expect this high boom cycle to last until 2024.

Actively optimize the product structure and create new material platform enterprises. According to the market demand, the company continues to optimize the product structure and increase the proportion of high gross margin products such as EVA, special surfactants and so on.

At the same time, the company continued to increase capital expenditure, 2023H1 capital expenditure reached 1.176 billion yuan, year-on-year + 149.17%, strongly promoting the progress of new projects. Among them, "20,000 tons / year UHMWPE and 90,000 tons / year Vinyl Acetate Joint Plant Project", "Biodegradable material Polylactic Acid Project", "Electronic Grade High Purity Special Gas and Lithium Additives Project" will be completed and put into production by the end of 2023; "Integration Project of New Energy Materials and Biodegradable Materials" has started construction and is scheduled to be completed and put into production in 2025. After the project is put into production, it will further enhance the company's overall profitability and anti-risk ability.

Investment suggestion: we expect the company's 2023-2025 net return to be 6.81 EPS 8.65 / 1.149 billion yuan, respectively, 0.51 Universe 0.65 Universe 0.86 yuan, corresponding to PE respectively 40-31-24 times, considering the company as one of the main suppliers of EVA photovoltaic materials, will fully benefit from the high growth of the photovoltaic industry, and new projects have been put into production to contribute to the performance increment and maintain the "Buy" rating.

Risk hint: the price of the product has fallen sharply and the progress of the new project is not as expected.