The company is a leading enterprise of wooden activated carbon. The company has ploughed the activated carbon industry for more than 20 years and has been committed to the research and development, production and sales of wooden activated carbon since its inception. It is the largest and strongest wooden activated carbon manufacturer in China. The company mainly engaged in activated carbon, sodium silicate and silica gel three major business, over the years the basic plate continued to grow steadily. In 2023, we will actively create the second growth curve for the company through the layout of new energy carbon materials such as super capacitive carbon and hard carbon. In 2022, the revenue was 1.95 billion yuan, + 21.3% compared with the same period last year, and the net profit was 220 million yuan, + 47.6% compared with the same period last year. 2023H1 achieved revenue of 960 million yuan,-3.1% year-on-year; net profit of 110 million yuan, + 0.4% year-on-year. Q1 was under pressure due to short-term factors, and Q2 has gradually returned to growth.

The industrialization of sodium electricity is actively promoted and the long-term development prospect is optimistic. In 2023, the downstream of sodium battery was commercialized in many fields, including 1) electric four-wheeled vehicles: the Ministry of Industry and Information Technology announced for the first time two new models equipped with sodium batteries, which means that sodium batteries have met various loading standards. can meet the requirements of mass production; 2) Electric two-wheeled vehicles: two-wheeled head enterprises Yadi Holdings, Tailing Group, Xinri shares and so on have all entered the bureau. 3) Energy storage: a number of domestic sodium ion battery energy storage application projects began to be built. In the short term, the permeability of sodium electricity increases faster in two-wheelers, and the long-term space is mainly in the four-wheeler and energy storage market. We expect that the total demand for sodium batteries in 2023-2025 will be 2.6,17.3 and 90.9GWh.

The company actively distributes the hard carbon negative electrode business to create the second growth curve. In December 2022, the company set up a wholly-owned subsidiary Yuanli New Energy carbon Materials (Nanping) Co., Ltd., and the product matrix was extended to new energy carbon materials such as super capacitive carbon, hard carbon anode and silicon carbon anode. For the hard carbon negative electrode, the company takes the lead in using Phyllostachys pubescens to supplement the hard carbon raw material path, its unique location advantage can effectively alleviate the problem of consistency of hard carbon precursor raw materials, and is expected to reduce costs. The current layout of the company's "annual output of 50,000 tons of new energy hard carbon production project" has been in the pilot stage, and the first production line is expected to be put into production within this year. With the acceleration of the industrialization of sodium and lithium fast charging, hard carbon and silicon-carbon negative electrodes are expected to become the company's second growth curve.

The company's wooden activated carbon has a stable leading position and leads the development of low-carbon cycle in the industry. In 2022, the company's production and sales of wooden activated carbon exceeded 120000 tons, with a stable market share of 30%, ranking first in the country for many years. In addition to traditional applications such as food and beverages, the company continues to explore new downstream applications, including environmental protection such as VOCs and sewage treatment, as well as supercapacitors. In addition, the company starts with the construction of a circular industrial park, connects the business plates such as activated carbon, sodium silicate and silica gel through the recycling of materials and heat energy, and promotes the level of energy saving and consumption reduction driven by innovation. it is expected to reduce cost and increase efficiency of the company as a whole.

Profit forecast: the total revenue of the company from 2023 to 2025 is estimated to be 2.07, 25.7, and 38.0 billion yuan respectively, an increase of 5.8 percent, 24.3 percent, 48.0 percent, and net profit of 2.6 million, 3.3 million, and 49.9 percent, respectively, compared with the same period last year. Taking the closing price on September 28, 2023 as the benchmark, the PE from 2023 to 2025 is 21.9x/17.0x/11.3x. Coverage for the first time, with a "buy" rating.

Risk tips: lithium salt prices decline rapidly, sodium ion battery technology progress is not as expected, downstream market development is not as expected, the model calculates the risk.