Asphalt supply chain business procurement and terminal sales "price upside down". Under the influence of international geopolitics and other factors, the rise of international crude oil prices has led to high fluctuations in asphalt prices. at the same time, the operating rate of domestic infrastructure construction is insufficient and the demand of asphalt market is weak. it leads to the situation of "price upside down" between procurement and terminal sales in asphalt supply chain business. In the first half of 2023, Zhaohua Group, with the asphalt supply chain as its main business, realized operating income of 756.7551 million yuan, down 24.93 percent from the same period last year; net profit of-51.9536 million yuan, down 626.66 percent from the same period last year; and comprehensive gross profit margin of-1.42 percent, a decrease of 5.89 percent over the same period last year.

With a two-pronged approach, we will further study the special purpose vehicle and the new energy vehicle. In the first half of 2023, the overall operating income of the company's automobile manufacturing, sales and service business was 177.6514 million yuan, down 53.60 percent from the same period last year, and the comprehensive gross profit margin was 24.59 percent, an increase of 14.45 percent over the same period last year. Among them, Changfeng Special Automobile, a subsidiary of the company, actively expanded the business of emergency electric cars and energy storage vehicles, and its sales performance improved to a certain extent. In the first half of the year, Changfeng Special Automobile achieved an operating income of 115.6931 million yuan, an increase of 36.89% over the same period last year, and a net profit of 6.7739 million yuan, down 44.66% from the same period last year.

The new energy bus business of Sinochem Hongyuan, which is controlled by the company, has not yet recovered due to the superimposed impact of the market recession and other factors. In the first half of the year, Sinochem Hongyuan realized operating income of 1.3439 million yuan, down 99.13 percent from the same period last year, and realized net profit of-34.5054 million yuan, reducing losses by 27.13 percent over the same period last year.

With the gradual establishment and improvement of the national emergency management system and consciousness, special purpose vehicle manufacturing has ushered in important opportunities for development. Since the State Council promulgated the opinions on speeding up the Development of Emergency Industry in 2014, China's emergency industry has entered a stage of rapid development, and emergency management has become an important function of governments at all levels.

After the national institutional reform in 2018 integrated emergency management functions and established the Ministry of Emergency Management, the national budget system added "expenditure on disaster prevention and emergency management" as a first-level subject of general public budget expenditure in 2019. Under the trend of the development of the national emergency management system and the promotion of emergency management awareness of the whole society, the market space of special purpose vehicles will gradually open and have good opportunities for development.

China's new energy buses have entered a stage of rapid growth. In recent years, under the strong policy support and enterprises' continued efforts to strengthen R & D and marketing, China's new energy bus has developed rapidly and its permeability has increased rapidly, especially since 2021. Benefiting from policy support, the substantial improvement of the technical level of the industry, the gradual enrichment of product matrix and other factors, China's new energy bus has entered a stage of rapid development, and oil prices have reached record highs many times in 2022. It has further enhanced the development heat of new energy buses in our country.

Profit forecast: for the first time to cover the "overweight" rating. It is estimated that from 2023 to 2025, the operating income of the company will be 4.937 x/42.17x/19.94x, the net profit of home ownership will be-1.10 billion, and the corresponding earnings will be-22.68 x/42.17x/19.94x.

Risk hints: domestic and foreign macro situation changes more than expected; crude oil, refined oil and natural gas price fluctuation risk; management risk brought about by the company's business expansion; profit forecast and valuation model is lower than expected