Brief comment on performance

On October 19, the company released the third quarterly report of 2023. In the first three quarters of 2023, the company realized operating income of 800 million yuan, year-on-year + 29.48%, and homed net profit of 136 million yuan, compared with the same period last year. In the third quarter, the company realized operating income of 302 million yuan, year-on-year + 41.3%, and homed net profit of 61 million yuan, + 13.81% compared with the same period last year.

Business analysis

Revenue as a whole has maintained growth and costs have increased. During the reporting period, the cooperative relationship between the company and its major customers has been further consolidated and deepened in the field of household medical oxygen production.

With the concentrated efforts of a series of stable growth policies and measures, market expectations gradually recovered, and the demand of the company's downstream industrial customers gradually warmed up in the second half of 2023, which had a positive impact on the company's industrial oxygen molecular sieve demand. The operating income of Jianlong (Thailand) Co., Ltd. in the first three quarters increased by 89.75% over the same period last year. In addition, according to the company announcement, the company has realized the supply of molecular sieves for oxygen production in the new VPSA project of a large foreign gas company, and at the same time, it has also realized the supply of molecular sieves for oxygen production in the new VPSA oxygen production project of a 42000Nm3/h in the Democratic Republic of the Congo, further expanding the overseas market share. In the petrochemical and energy chemical industry, the company completed the molecular sieve supply of the second largest RNG project in the world and the largest in Asia in Petrochina Company Limited Changqing Oilfield and the super-large RNG project in Tarim Oilfield, and achieved a successful start-up. The successful landing of the above projects broadens the application scene of the company's products and further strengthens the company's leading position in the same industry.

The construction and commissioning of new projects will bring a new round of growth. At present, the company has a molded molecular sieve production capacity of 47000 tons, molecular sieve raw powder production capacity of 43000 tons. At present, the company is under construction of 263 million yuan, and there are plenty of projects under construction: 22 years to increase investment in the adsorption industrial park reconstruction and expansion project (phase I), 23 years to issue convertible bonds to invest in the adsorption material industry park reconstruction and expansion project (phase II), Thailand subsidiary construction project (phase II). We believe that with the commissioning of the above-mentioned projects, the company's market share and product structure will be further enriched.

Earnings forecast, valuation and rating

Raw material prices have fallen, and terminal demand has gradually recovered. We revised that the company's 2023-2025 net profit was 2.11,3.01 (- 14.37%) and 405 million yuan (- 11.50%) respectively; EPS was 2.54,3.62 and 4.86 yuan respectively, corresponding to PE of 20.99X, 14.71X and 10.94X respectively. Maintain a "buy" rating.

Risk hint

The production capacity construction of molecular sieve is not as expected; the release rhythm of catalytic molecular sieve is not as expected; the competition pattern of products is deteriorating; the demand of molecular sieve is not as expected.