The company released its three-quarter report in 2023, with operating income of 555 million yuan in the third quarter, down 32.52% from the same period last year, and net profit of 31 million yuan from the same period last year, down 74.39% from the same period last year. 33 million yuan was deducted from non-parent net profit, down 74.60% from the same period last year. The gross profit margin of sales was 19.25%, down 5.15 pct from the same period last year, and the net profit margin was 5.67%, down 0.61 pct from the same period last year.

Product prices decline, new project conversion cost pressure, short-term performance pressure. Pesticide market differentiation in the third quarter, superimposed demand off-season, the company's average product price continued to decline. In terms of herbicides, according to Wind data, the average prices of 2023Q3 chlorofluoropyloxyacetic acid, cyanofenoxy ester and propargyl ester were 10.54,12.37,225,000 yuan / ton respectively, down 22.35%, 10.65% and 0.005% respectively from the previous year, and 40.07%, 34.89% and 12.16% respectively compared with the same period last year. In terms of pesticides, the average prices of 2023Q3 thiamamide and acarbazide were 8.27,169600 yuan per ton respectively, down 5.92% and 7.26% respectively from the previous month, and 35.61% and 30.79% respectively compared with the same period last year. In addition to the continuous decline in product prices, the company was prepared to increase the impairment loss of assets by 2 million yuan in the third quarter due to the decline in inventory prices. at the same time, the company incurred financial expenses of 5 million yuan in the third quarter, an increase of 34 million yuan from the previous quarter, an increase of 32 million yuan over the same period last year, mainly due to the use of interest expenses after the consolidation of the company's new project, while the project was in the construction period in the same period last year. On the whole, the above factors all lead to the short-term pressure on the company's Q3 return net profit, and the overall performance is lower than market expectations. In the long run, pesticide prices have hit bottom and are expected to stabilize and rebound in the future. The company binds overseas agrochemical giants for sales, with stable demand, strong ability to adapt to market changes, and strong performance recovery ability in the later stage.

Actively expand new products, growth still exists. The company's Huaibei base oxazolidone is expected to be put into trial production in October. At present, there is no existing production capacity of oxazolidone in China. After putting into production, the company will have the right to take the lead and open up the market space. In addition, the company's original drug oxazolylglycyrrhizin, pentafluorosulfonamide in Nanjing base, and difluorosulfonamide, oxazolyl chlor and chlorobenzamide in Huaian base are all expected to be put into production in 2023. The company is actively expanding the new products with exuberant market, and the growth still exists.

Adjust the earnings forecast to maintain the "buy" rating. Considering that the company's product price is still at the bottom and the cost pressure after the launch of the new project, we adjust our profit forecast and expect the company's operating income in 2023-25 to be 25.90,35.04 and 4.038 billion yuan (previously 31.89,37.64 and 4.457 billion yuan). The net profit of returning to the mother was 2.48,3.97 and 511 million yuan (previously 3.87,4.83 and 581 million yuan). The corresponding PE is 18x, 11x and 9X respectively, maintaining the "buy" rating.

Risk hint: product price fluctuations, capacity release and construction are not as expected.