Focusing on the research and development of high-end plastic additives for 20 years, it has now grown into a leader in the nucleation agent and synthetic hydrotalcite industry. Since its establishment in 2002, the company has been committed to the R&D and production of high-end plastic additives. Currently, the company has large-scale production capacity for more than 200 different types of nucleating agents, synthetic hydrotalcite and composite additives. The company's core products have obtained entry certification from the world's mainstream polypropylene resin production process technology Novolen (BASF development) and Unipol (joint development between Shell and the US UCC). It is the only certified nucleation agent and synthetic hydrotalcite product in China. The company has always insisted on R&D innovation for many years, creating its own unique competitive advantage in product formulation, production technology, qualification certification, and customer development.

The nucleating agent is a high-end polyolefin additive, and the company is the main domestic replacement force. The nucleating agent can improve the performance of polyolefin and play the role of permeation, strengthening, and toughening. It is a high-end plastic additive. The company's transparent nucleating agents and strengthening nucleating agents are comparable to advanced international brands, and pioneered tetrahydrophthalic anhydride beta crystal toughening nucleating agents. In 2017-2021, the localization rate of nucleating agents increased from 9.52% to 27.1%. In 2019, the company's market share among domestic suppliers was nearly 70%, making up the main domestic substitution force. At present, the company has become a qualified supplier to large energy and chemical companies such as Sinopec, CNPC, and CNOOC.

Synthetic hydrotalcite is an environmentally friendly PVC heat stabilizer, and the company's leading position is stable. As an environmentally friendly PVC heat stabilizer, synthetic hydrotalcite has a lot of room to replace toxic heat stabilizers. The highly transparent synthetic hydrotalcite produced by the company is in a leading position in the world. It has already supplied world-renowned heat stabilizer manufacturers such as Edico and Belloch on a large scale. It is also the only domestic synthetic hydrotalcite designated for use by Sinopec, promoting the import replacement process of synthetic hydrotalcite. Currently, the new production capacity of synthetic hydrotalcite in China is limited. After the company's IPO fund-raising project is put into operation, it will further consolidate its leading position in the industry.

After the IPO fundraising project is put into operation, the company's production capacity will increase exponentially. The company currently has a production capacity of 21,000 tons of nucleating agents, synthetic hydrotalcite, composite additives, etc., and the production capacity of IPO projects is 36,600 tons. It is planned to start production in September 2024. At that time, the total production capacity of the company's main products will reach 57,600 tons, and production capacity will increase exponentially, further consolidating the company's leading position in the industry of nucleating agents and synthetic hydrotalcite.

Investment advice: We believe that the company is a leading domestic nucleating agent and synthetic hydrotalcite enterprise, and that there is broad scope for import substitution in the industry. With the gradual release of the company's production capacity under construction, we are optimistic that the company will continue to grow steadily in the future. We expect the company's net profit from 2023-2025 to be 228/2.91/367 million yuan, diluted EPS to be 1.71/2.18/2.75 yuan, and the current stock price corresponding to PE of 23.6/18.4/14.6x. We are optimistic about the company's long-term steady growth and maintain the “increase in holdings” rating.

Risk warning: market development risk; risk of raw material prices rising or failure to supply in a timely manner; risk that the company's business development will be greatly affected by downstream customers; risk of increased market competition; risk of capacity digestion in fund-raising projects, etc.