The company is the leader of nylon 66 industrial chain, with technical and scale advantages. The company's adiponitrile project is advancing steadily, which will break the raw material limitation after it is put into production, and the production capacity of hydrogen ammonia project and nylon 66 will be expanded to expand its cost and scale advantages. We estimate that the return net profit of the company from 2023 to 2025 is 1.52,4.39 and 783 million yuan, and the corresponding EPS is 0.15,0.42,0.75 yuan. With reference to the comparable company's PE valuation and PB valuation, the company is given a target price of 9.50 yuan, covering it for the first time and giving a "buy" rating.

The company is the leader of nylon 66 industrial chain, and its performance is expected to bottom out and pick up in 2023. The company's main nylon 66 chips, industrial filament, cord fabric, downstream applications for engineering plastics, electronics and electrical appliances, automotive fields. According to the company's mid-2023 report, 23H1 lost 35 million yuan. Considering the gradual pick-up in downstream demand, we believe that the company's production, sales and profits are expected to bottom out and are optimistic about 23H2's profit repair.

The steady progress of the adipic nitrile project is expected to break the situation of raw material restrictions. Adiponitrile, the key raw material of nylon 66 industrial chain, has long been monopolized overseas, accounting for more than 90% of overseas production capacity. In recent years, China has achieved a breakthrough in localization, but the production capacity is small and the technological maturity is not high. The company adopted independent research and development technology and successfully completed the pilot test of adipic nitrile. according to the company announcement, the 50,000-ton industrial plant is expected to be put into commissioning at the end of 2023. After this project is put into production, the company will get rid of the restrictions of processing materials and raw materials from overseas. realize the integration of the whole industry chain of nylon 66. The long-term company plans to produce 200000 tons of adiponitrile, which is completely self-sufficient in raw materials after it is put into production.

The hydrogen ammonia project + adiponitrile project will reduce the cost and increase the profit after it is put into production. We expect that 400000 tons of liquid ammonia and 50000Nm3/h hydrogen will operate steadily in early 2024, self-sufficiency of raw materials will help the company save 90 million / year costs, rich products can be sold out; coke oven gas and hexanediol projects have been put into production to contribute to performance; partial self-sufficiency of adipic nitrile is expected to save 50 million in 2025. In terms of cost reduction, the company actively promotes fuel power, reduces a number of costs, and thickens profits. We believe that the commissioning of key raw materials such as adiponitrile, basic raw material liquid ammonia and hydrogen will enhance the company's profit center, and the long-term layout of 200000 tons of adiponitrile will further enhance profitability.

The company continues to extend the industrial chain, the layout of differentiated products. With the further localization of diconitrile and nylon 66 industry, we expect that the demand for nylon 66 is expected to further increase, and the demand in the field of civil silk and automobile will grow rapidly. The company invests 20,000 tons of nylon 66 civil silk and printing and dyeing business, layout differentiated products, expand market share. At the same time, the company has completed the pilot test of aramid fiber, and its production capacity of 2000 tons is expected to be released in 2025, demonstrating its technical strength. We believe that the company's industrial chain continues to extend and improve, based on the whole industrial chain of nylon 66 and the continuous layout of differentiated products, optimistic about the company's long-term development.

Risk factors: the risk of intensified market competition; the recovery of downstream demand is not as expected; the risk of sharp fluctuations in raw material prices; the company's new project progress is not as expected; the company's adiponitrile production commissioning is not as expected; production safety risk.

Profit forecast, valuation and rating: the company is the leader of nylon 66 industrial chain, with technical and scale advantages. The company's adiponitrile project is advancing steadily, which will break the raw material limitation after it is put into production, and the production capacity of hydrogen ammonia project and nylon 66 will be expanded to expand its cost and scale advantages. We estimate that the return net profit of the company from 2023 to 2025 is 1.52,4.39 and 783 million yuan, and the corresponding EPS is 0.15,0.42,0.75 yuan. Combined with PE and PB valuation methods, we give the company a target price of 9.50 yuan, corresponding to 23 times PE in 2024, covering for the first time and giving a "buy" rating.