The “integration of industry and trade” strategy creates the entire industry chain from production to trade to service, with the agricultural industry+fine chemicals parallel:

According to the announcement, the company is a holding enterprise of the Anhui Federation of Supply and Marketing Cooperatives, and the agricultural distribution industry ranks first in Anhui Province and third in the country in terms of overall competitiveness. Based on the agricultural product agency distribution business, the company expands fertilizer production upstream, establishes agricultural service centers downstream, and opens up a full chain of one-stop integrated services from production to trade to the consumer side, and has the advantages of high-quality resource control and perfect terminal network channels. At the same time, the company is also actively expanding to the upstream resource side, participating in the bankruptcy and restructuring of the Chinese League phosphate industry, and getting involved in high-quality phosphate resources. According to the survey, reserves can reach 95 million tons, with outstanding resource advantages. The company entered the field of fine chemicals through the acquisition of Haihua Technology. The mesocresol - thymol - L menthol process route broke foreign technology monopolies and became an important profit growth point for the company in the future.

With the opening of the mesocresol-thymol - menthol industry chain, it is expected to gradually grow into the company's second performance pillar:

According to the announcement, the company's 3,000-ton menthol project and the 10,000-ton metacresol production expansion project were successfully put into operation in 2022. Haihua Technology became the only company in the world with a core industrial chain from “toluene - chlorotoluene - mesocresol - thymol - L-menthol”, and its international competitiveness has greatly improved. At present, the company's menthol process is running well, production and sales continue to increase, and the development trend is good. Menthol prepared by industrial synthesis has higher purity, lower cost, and stable supply. It is expected to gradually replace natural menthol in the market space, and demand continues to rise in the fields of daily chemicals, food, etc.; the thymol route adopted by the company focuses on chiral separation technology, eliminating the expensive catalyst ligands and harsh process conditions required for early chiral reduction steps. The pollution is relatively low, and the industrialization advantages are remarkable. Under conditions where there are sufficient raw materials for cresol between companies, menthol production capacity is expected to expand by large tonnage in the future, gradually becoming the company's second profit pillar industry. At the same time, Haihua's industrial chain is expected to continue to expand in the direction of many small varieties and more downstream cooling agent products, which will further provide growth flexibility.

Investment advice:

The company's net profit for 2023-2025 is estimated to be 675 million yuan, 894 million yuan, and 1.18 billion yuan, respectively, corresponding to 11.7, 8.8, and 6.7 times PE. The company was given 16 times PE in 2023, corresponding to a target price of 11.32 yuan. For the first time coverage, a buy-A rating was given.

Risk warning: Fluctuations in product and raw material prices, capacity construction progress falling short of expectations, foreign investment risks, uncertainty about the development of innovative industries, etc.