Event: the company released its three-quarter report in 2023, with revenue of 1.42 billion yuan in the first three quarters, + 9.0% year-on-year, and net profit of 110 million yuan, + 56.9%, and basic EPS 0.60 yuan in the first three quarters. In the third quarter alone, the revenue was 490 million yuan, + 5.1% year-on-year, + 2.5% month-on-month, and the net profit was 54 million yuan, + 691.9% year-on-year and + 27.9% month-on-month.

The price of Q3 carbon black starts to rise, the downstream demand is exuberant, and the profit increases greatly compared with the previous month. In the first three quarters, the company realized revenue of 1.42 billion yuan, year-on-year + 9.0%, net profit of 110 million yuan, + 56.9% year-on-year; revenue of 490 million yuan, year-on-year + 5.1%, month-on-month + 2.5%; and net profit of 54 million yuan, + 691.9%, + 27.9%. The company's performance in the third quarter increased sharply compared with the same period last year, because the price of carbon black, the company's main product, began to rise in the third quarter. According to Zhuochuang Information, the average market price of Q3 carbon black in 2023 was 9110.94 yuan / ton, with a range increase of 23%. From the supply side, the average price of raw material coal tar in the third quarter was 4354.7 yuan / ton, an increase of 21%, and a month-on-month increase of + 17.9%, supporting the rise in carbon black price. On the demand side, the start-up level of tire enterprises is relatively high, the operating rate of semi-steel tires is maintained at more than 70%, and the demand for carbon black is strong. Price rise superimposed strong demand, carbon black plant profits turned negative to positive in late August, the company's performance in the third quarter is outstanding.

Q4 carbon black market trend is more optimistic, the company's annual performance can be expected. According to Zhuo Chuang information, the current carbon black inventory is in a low position throughout the year, the price of coal tar continues to rise, and some carbon black enterprises begin to stop production and maintenance of the equipment in order to control production costs, and the supply is relatively tight; with the arrival of "Golden Nine Silver 10", downstream tire enterprises have entered the traditional sales peak season, under the strong support of the cost side, tire enterprises have announced price increases, currently maintain a high production schedule, and perform well in rigid demand for carbon black. We believe that in the fourth quarter of 2023, the trend of the carbon black market is more optimistic, and the company's annual results can be expected.

Break through the neck-sticking technology to achieve sustainable and common development. Seizing the opportunity of the high-voltage trend of the power grid and the booming development of new energy vehicles and supporting industries, the construction of the project of "annual output of 100000 tons of nano-carbon materials for high-voltage cable shielding materials" has been steadily progressed. the aim is to realize the domestic replacement of nano-carbon materials for high-voltage cable shielding materials. According to the company's estimate, after reaching production, the project is expected to contribute 1.58 billion yuan in revenue and 270 million yuan in net profit each year, enhancing the company's long-term sustainable development ability.

Profit forecast and investment advice. It is estimated that the EPS from 2023 to 2025 will be 0.72,0.90,1.24 yuan respectively, and the corresponding dynamic PE will be 23 times, 18 times and 13 times respectively. We will give the company 23 times PE in 2024, corresponding to the target price of 20.70 yuan, maintaining the "buy" rating.

Risk hint: the risk of a sharp decline in the economy, the lower-than-expected risk of project production, the lower-than-expected risk of downstream demand, and the risk of substantial fluctuations in raw material prices.