The company publishes its 2023 semi-annual report. 2023H1 achieved a total revenue of 1.004 billion yuan, + 9.57% year-on-year, and a net profit of 148 million yuan,-51.59%, compared with the same period last year. From a quarterly point of view, Q2 company achieved revenue of 540 million yuan in 2023, + 12.69% year-on-year, and net profit of 107 million yuan,-34.74% of the same period last year.

The decline in performance is mainly due to the sharp fluctuation in the price of raw material lithium carbonate, the gross profit of spinel lithium manganate products decreased compared with the same period last year, and the sales volume of electrolytic manganese dioxide products decreased year-on-year due to the continuous tightening of market demand for primary batteries downstream. Investment income in associated enterprises decreased compared with the same period last year.

Electrolytic manganese dioxide business: product revenue declined compared with the same period last year, and the market demand is expected to increase moderately in the future.

2023H1, under the situation of tight demand in the battery industry, the company's revenue of electrolytic manganese dioxide products reached 465 million yuan,-21.24% compared with the same period last year. At present, the company has an annual production capacity of 122000 tons of electrolytic manganese dioxide, which is in the forefront of the industry. In view of the fact that manganese-based materials have the characteristics of rich manganese sources, low cost and high voltage, the large-scale application of electrolytic manganese dioxide in sodium and other new energy battery materials will bring new market demand for the industry.

Lithium manganate business: give full play to the synergy of the industry chain and actively layout new energy battery materials. 2023H1 sold 5600 tons of spinel lithium manganate products, + 366.67% year-on-year, realized revenue of 364 million yuan, + 207.3% year-on-year, and realized sales gross profit of-31.9214 million yuan,-162.84% year-on-year. The company attaches importance to the layout of the industrial chain, forming an industrial chain of electrolytic manganese dioxide, manganese tetroxide + lithium manganate, by giving full play to the synergy of the industrial chain to improve competitiveness. 2023H1, the conclusion of the construction project of Xiangtan electrified New Energy Materials Research Institute, will further promote the seamless docking of the basic research and industrialization of the company's new energy materials industry, optimize the company's industrial layout and product structure, so as to improve the profitability.

Sewage treatment business: the business runs smoothly with good social and economic benefits. 2023H1 treated a total of 44.6947 million tons of urban sewage, + 7.14% year-on-year, achieving revenue of 67.1149 million yuan, + 9.85% year-on-year. The company's sewage treatment business adopts the business model of "government concession, government procurement and enterprise management", which has rigid characteristics, is not easily affected by macro-economy, and has relatively stable income, profit and cash flow.

Profit forecast and investment rating. We estimate that the net profit of the company in 2023 to 2025 will be 305 million yuan, 405 million yuan and 568 million yuan respectively, and the EPS will be 0.48,0.64 yuan and 0.90 yuan respectively. With reference to the valuation level of the comparable company, it is given a 24-25 times PE in 2023, corresponding to a reasonable value range of 11.52-12.00 yuan, and an investment rating of "better than the big city".

Risk tips: product price fluctuations, project construction, rising prices of raw materials.