The company releases its third quarterly report for 2023

In the first three quarters of 2023, the company realized operating income of 1.396 billion yuan, down 21.48% from the same period last year, realized net profit of 101 million yuan, down 59.70% from the same period last year, and deducted 95 million yuan from non-home net profit, down 60.76% from the same period last year. Q3 realized operating income of 428 million yuan in a single quarter, down 18.68% from the same period last year, realized net profit of 11 million yuan, down 81.25% from the same period last year, and deducted 9 million yuan from non-home net profit, down 83.34% from the same period last year.

Downstream demand sluggish superimposed seasonal fluctuations, the first three quarters of the main product performance pressure due to macroeconomic weakness and lack of consumer confidence, the plastic products industry maintained a weak situation. Superimposed Q3 is the off-season of traditional sales in the chemical industry, the volume and prices of fine chemical businesses such as cyanuric chloride are both weak, and the performance of the company's main products declined significantly in the first three quarters compared with the same period last year. Q4 peak season plans to increase the sales price of cyanuric chloride, is expected to ease the performance pressure.

Wet diaphragm production capacity climbing smoothly, looking forward to the layout of downstream customers, the future incremental space can be expected that the company wet diaphragm production capacity climbing smoothly, strong order demand. In 2022, four lithium electrowet diaphragm production lines have been put into production, with a total capacity of 300 million tons per year, with an additional capacity of 400 million tons in 23 years, with a total capacity of 1.3 billion tons planned for the long term.

The company's forward-looking layout downstream has reached a cooperation with battery manufacturers and has supplied lithium diaphragms such as power and energy storage in bulk. With the completion of customer diaphragm certification, production capacity climbing smoothly is expected to achieve order delivery, continuous contribution increment.

Prussian blue sodium power production order release on the ground, pay attention to the follow-up performance to cash in 1) the advent of industry norms and standards to promote the development of sodium power industry. On October 7, the China Chemical and physical Power Industry Association announced that the whole network would solicit opinions on the General Specification for Sodium Ion batteries. The introduction of the standard will provide a reliable standard for the verification of sodium ion products and promote the healthy development of the sodium power industry.

2) the production capacity of Prussian blue cathode is released steadily, or it may become a new growth pole of the company. On October 26, the plan of the industrialization project of 180000 tons of battery-grade Prussian blue (white) was adjusted based on the actual development plan. The first phase is planned to build a technical transformation project of 5000 tons of Prussian blue sodium battery cathode materials, which is expected to be completed and put into production by the end of 2023. The second and third phases are expected to have an annual production capacity of 55,000 tons, and are expected to be completed and put into production by the end of June 2025 to the end of June 2027. The production capacity of the project will be gradually released, or it will become a new revenue growth point for the company.

3) Prussian blue sodium electricity order landed on the ground, pay attention to the follow-up performance gradually realized. On September 14, Huihong Technology signed a purchase order with a contract amount of 10 million yuan (including tax) with Cube New Energy, agreeing that Huihong Technology will sell 200 tons of Prussian blue sodium ion battery cathode materials to Cube New Energy. The company's sodium cathode material order landed and contributed to the performance increment.

Investment suggestion: we expect the production capacity of Prussian blue sodium cathode materials and the release pace of order demand to slow down, so we adjust the company's net profit of RMB 1.51 less than 2.54 billion yuan in 23-24-25 (the previous value is 2.52company3.95company6.01), corresponding to 43x/26x/15x E, maintaining a "buy" rating.

Risk tips: the development of new energy vehicles is not as expected; the development of capacity expansion products is not as expected; material price fluctuations and so on.