Incident: On December 12, 2023, the company first repurchased 20,400 shares of the company through the Shanghai Stock Exchange trading system through centralized bidding, accounting for 0.015% of the company's total share capital. The maximum price of the repurchase transaction was 38.70 yuan/share, the lowest price was 38.35 yuan/share, and the total capital paid was RMB 787,850.92 (excluding transaction fees such as stamp duty and transaction fees).

The company began to buy back and continue to be optimistic about long-term development. On November 15, the company announced that it plans to use its own capital to buy back stocks at an appropriate time in the future for equity incentives or employee stock ownership plans. The repurchase price is tentatively set at no more than RMB 46.50 per share (inclusive), and the total repurchase capital is not less than RMB 50 million (inclusive) and no more than RMB 10,000 million (inclusive). According to the minimum repurchase amount of RMB 50 million and the repurchase price of RMB 37.00 per share, the number of shares repurchased is about 1.00% of the company's total share capital; based on the maximum repurchase amount of RMB 10,000 and the repurchase price of RMB 37.00 per share, the number of repurchases is about 2.7 million shares, and the share repurchase ratio accounts for about 2.00% of the company's total share capital. On December 12, the company began repurchasing. The company first repurchased 20,400 shares of the company through the Shanghai Stock Exchange trading system through centralized bidding, accounting for 0.015% of the company's total share capital. The maximum price of the repurchase transaction was 38.70 yuan/share, the lowest price was 38.35 yuan/share, and the total capital paid was RMB 787,850.92. The company management has full confidence in the company's future development and highly recognizes the company's value. With the rapid increase in market demand for more environmentally friendly and safe products and the continuous expansion of demand for downstream applications, the development momentum of China's synthetic hydrotalcite market is getting stronger and stronger, and the company's industry prosperity will continue to rise.

Acquire Keao Chemical to enrich the company's product layout and enhance the company's comprehensive competitive strength. The company acquired 100% of the shares of Tangshan Keao Chemical and Tianjin Cindafeng in cash, and increased the capital of Keao Chemical by 50 million yuan.

Among them, the price of the Keao Chemical transaction was 88.3 million yuan, and the price of Cindafeng's transaction was 1.7 million yuan. Keao Chemical mainly produces and sells high-end specialty antioxidants, and also carries out processing services such as compounding and granulation related to antioxidants. The main products are mixed products such as the intermediate 3,5 methyl ester, antioxidant series products, rubber and plastic additives, and composite antioxidants. In 2021, Keao Chemical achieved a net profit of 32.1 million yuan. Cindafeng mainly engages in domestic sales and export of antioxidants, UV absorbers, and light stabilizers, and mainly purchases and sells Keao Chemical products. Cindafeng has been deeply involved in the chemical sales field for many years, has formed a good reputation and reputation in the antioxidant industry, and has accumulated and served a number of long-term stable cooperative customer resources. In 2021, Cindafeng achieved a net profit of 3.74 million yuan. We believe that the company's acquisition of a high-end specialty antioxidant company at a very low price has enriched the company's product range, which is conducive to further expanding and optimizing the company's polymer additives business layout and achieving collaborative development across multiple businesses.

With its product advantages, the company's import substitution is smooth. Due to a good competitive landscape and continuous optimization of the product structure, the company's roe continues to maintain a high level. We expect a month-on-month increase in results for the fourth quarter of 2023. The main competitor of the nucleating agent is Milliken of the United States. There is also a big gap between the two domestic companies and companies. The main competitor of hydrotalcite is Kyowa, Japan, which is more than 90% dependent on imports. The domestic focus is Hehe Technology. On the one hand, the company conducts forward-looking research and development guided by potential market demand, and on the other hand, it conducts customized research and development centered on customer needs, maintaining the forward-looking and advanced nature of the company's technology while meeting customer needs. At present, the company has large-scale production capacity of more than 180 different types of nucleating agents, synthetic hydrotalcite and composite additives, and has the ability to supply one-stop raw materials to high-quality downstream customers. The company has outstanding R&D capabilities. The new beta nucleating agent and ternary hydrotalcite are innovative products with more outstanding performance and broad future space. In addition, we have a large reserve of varieties in the development of new products. For example, new products such as hydrotalcite for agricultural films, hydrotalcite for wires and cables, and polypropylene film acid absorbers have been completed and accepted, and the products are in a leading position in the country. The company is the first domestic company to pass the US FDA's food contact substance approval, and is currently the Chinese company that has passed the most approvals. The core products have obtained technical entry qualifications for Novolen and Unipol, the world's mainstream polypropylene process devices, which shows that the company's product technology and quality have reached international advanced levels.

Maintain a “Highly Recommended” investment rating. We forecast future revenue of the company for 2023-2025 to be 860 million yuan, 1,059 million yuan and 1,302 million yuan, respectively, net profit of 230 million yuan, 287 million yuan and 371 million yuan respectively, and EPS of 1.70 yuan, 2.12 yuan and 2.74 yuan respectively. The current stock price corresponding to PE is 22.6 times, 18.1 times, and 14.0 times, respectively, maintaining a “highly recommended” investment rating.

Risk warning: The risk that production capacity construction falls short of expectations and raw material prices will rise.