Event: the company released its semi-annual report 2023 on August 25. During the reporting period, revenue, net profit and net profit deducted from non-return were 4.92,1.03 and 101 million respectively, which were-6.02%,-21.51% and-19.26% respectively compared with the same period last year. Among them, Q2 revenue, net profit and net profit deducted from non-return were 2.44,0.52 and 50 million respectively, which were-8.15%,-16.13% and 12.46% respectively over the same period last year. The month-on-month ratio is-1.64%, + 3.41% and + 0.20% respectively.

Sulfoxide chloride is in the doldrums, resulting in short-term performance pressure. 2023H1, the company's three main sectors of carboxyl chloride (including aramid polymerization monomer, p-nitrobenzoyl chloride, chloroacetyl chloride, etc.) / inorganic chemicals (including thionyl chloride and thioyl chloride) / hydroxychloride (including chloroether, etc.) achieved revenue of 3.3,1.0 and 60 million yuan respectively, year-on-year + 22.6%,-52.9%, + 75.2% Gross profit margin 40.4%, 36.7%, 24.4%, year-on-year + 5.1pct,-7.9pct, + 5.8pct. The good income performance of carboxyl chloride is mainly due to the expansion of downstream aramid enterprises, which leads to the growth of aramid monomer demand. The decline in revenue from the inorganic chemicals business is mainly due to the macroeconomic impact, the downturn in the chemical industry, and the downward and continued low price of thionyl chloride. The substantial increase in income of hydroxyl chloride is mainly due to the increase in the production capacity of new chloroether. In terms of profitability, 2023H1's gross profit margin and net profit margin were 37.3% and 20.9% respectively, year-on-year-0.9pct and-4.2pct, respectively.

2023Q2 gross profit margin and net profit margin are 36.1% and 21.4% respectively, year-on-year-0.2pct and-2.08pct, month-on-month-2.3pct and + 1.0pct. The company continues to increase R & D investment, R & D innovation, the company's cumulative R & D expenditure of 30 million yuan in the first half of the year, + 41.2% compared with the same period last year.

Sulfoxide chloride boom may have bottomed out, the new demand LIFSI long-term space. In 2023, the price of thionyl chloride continued to decline due to weak downstream demand. According to Baichuan data, the price of thionyl chloride continued to decline from 1725 yuan / ton at the beginning of the year. As of September 24, the price of thionyl chloride fell to 1420 yuan / ton, a drop of-17.7%, which is at a three-year low. The profitability of the industry fluctuates up and down the profit and loss line. According to our calculation, it is expected that in the future, with the recovery of downstream traditional sucralose demand, superimposed LIFSI gradually replace 6F and aramid monomer to expand production, the supply and demand pattern of thionyl chloride may be tightened. As the leader of thionyl chloride in the world, the company has a production capacity of 150000 tons, showing a super pattern. At the same time, with the sulfur dioxide separation and circulation technology combined with geographical advantages, the gross profit margin remains at a high level. It is expected that with the improvement of the supply and demand pattern of thionyl chloride in the future, the profitability of the thionyl chloride plate will gradually recover.

The industrial chain continues to extend and actively layout new materials. Based on thionyl chloride as the core product, the company extends to the lower reaches of the industrial chain. At present, the production capacity of aramid monomer continues to expand, while the layout of new electrolyte LIFSI and high-precision plastic PEKK. The company currently has a production capacity of 20,000 tons of aramid monomer under construction. The performance index of the new electrolyte LIFSI is better than that of 6F, and the 6F may be partially replaced in the future. The company has mastered the chlorination and fluorination technology, and plans to issue convertible bonds to raise and invest 10, 000 tons of LIFSI in December 2022. The construction period is 24 months, and the registration draft has been listed online in July 2023. PEKK is a high-precision plastic at the top of the pyramid, and the company is one of the few domestic enterprises with the production capacity of the whole industry chain of PEKK. The first phase of 1000 tons / year PEKK production line has been in the stage of sequential trial production and commissioning, and the second phase of 1000 tons / year will be built according to market demand. It is expected that as the new project continues to be put into production, it will contribute a large increase to the company's performance.

Investment suggestion: as the leader of thionyl chloride industry, the company has a significant cost advantage in the integration of industrial chain. At the same time, the company actively distributes PEKK, LIFSI and other high-tech new materials. As the price of sulfoxide chloride is in the doldrums, the company's 23-25 year return net profit forecast is adjusted to 2.5max 3.8 / 540 million yuan (the original forecast for 23-24 years is 4.9 / 640 million yuan), and the corresponding share price PE is 36.9 shock 24.2 shock 16.8 times. Although the economic downturn in the first half of the year is under pressure, the performance is expected to be greatly improved in the future with the production of new lithium salt LIFSI and new material PEKK. Maintain a "buy" rating.

Risk hints: raw material price fluctuations exceed expected risk; downstream demand is lower than expected risk; capacity expansion is less than expected risk; new capacity downstream can not digest the expected risk; technological change risk; information update is not timely and other risks.