Incident 1: The company plans to establish a subsidiary, Shandong Shida Chemical Co., Ltd. (subject to the name approved by the industry and commerce department) to invest in the construction of an integrated lithium battery and green new materials project. The construction contents are: 1.2 million tons/year alkane dehydrogenation plant and supporting projects, 2 x 100,000 tons/year aniline plant and supporting projects. The total investment of the project was 236.9.97 million yuan, of which the construction investment was 186,820.54 million yuan, and the working capital was 450.36 million yuan.

Incident 2: Shandong Shenghua Guohong New Materials Co., Ltd., a holding subsidiary of the company, plans to invest in the construction of a 10,000 tons/year dimethyl sulfoxide project. The total investment of the project is estimated at 15 million yuan, 80 million yuan in the first phase and 70 million yuan in the second phase. The construction period for the first phase of the 5,000 tons/year dimethyl sulfoxide project is 18 months. It is expected to be completed and put into operation in June 2025, and the second phase of the 5,000 tons/year dimethyl sulfoxide project will take the opportunity to carry out construction.

Invest in the construction of lithium batteries and new green materials integration projects to expand the layout of aniline, the upstream raw material of the company's fluorobenzene.

Focusing on the fields of new energy and new materials, the company extends the fine chemicals business vertically and develops new lithium battery material products horizontally. The lithium battery and new green materials integration project is scheduled to be launched in June '24. It is expected to reach basic trial production status by the end of December '25. The project will increase annual revenue of 7.776 billion yuan and net profit of 484 million yuan after completion of production. The payback period after tax is 5.65 years (including construction period). In addition, the 1.2 million tons/year alkane dehydrogenation unit in the project will provide raw materials such as benzene and hydrogen for the 2×100,000 tons/year aniline unit, and aniline is the raw material for the company's fluorobenzene plant, so the industry chain can be fully extended. At present, the company has a production capacity layout for fluorobenzene, and announced in August 23 that its holding company Dongying Fuhuada Yuanxin Materials Co., Ltd. will launch a 10,000 tons/year high-end fluorine materials project (Phase II). It plans to build 2,000 tons/year of fluorobenzene, which is expected to be put into operation in April '24.

Follow the development trend of the DMSO industry and plan to lay out 10,000 tons/year DMSO production capacity. As an excellent solvent, dimethyl sulfoxide is widely used in petroleum, chemical, pharmaceutical, electronics, synthetic fiber, plastics, printing and dyeing industries. In particular, with the development of production of novel quinolone-like antimicrobials such as haloperic acid and fluorofluoroaniline in the pharmaceutical industry, as well as the development of the carbon fiber and electronics industry, domestic DMSO market demand is also growing, and the overall DMSO industry is improving in the future. The company closely follows industry trends and plans to build a 10,000 tons/year dimethyl sulfoxide project. After delivery, the project can achieve annual sales revenue of 271 million yuan and net profit of 90 million yuan. In addition, the project fully relies on various favorable construction conditions such as methanol and hydrogen sulfide as raw materials from Yankuang Guohong, a nearby factory area, and can maximize the advantages of the region and industrial chain. At the same time, the project will also strengthen intelligent production applications and vigorously increase product technology content.

Profit forecast, valuation and rating: The company is a company in the entire industry chain of lithium-ion battery electrolytes and electrolyte solvents, solvents and additives. Affected by the decline in industry sentiment, the company's performance declined year-on-year in the first three quarters of 23 years.

We maintain the company's profit forecast for 23-25, and expect the company's net profit to be 1.08/2.06/342 million yuan for 23-25, respectively. The company is rapidly expanding its production capacity for products such as electrolytes and actively expanding its range of lithium battery materials. After the new production capacity is implemented, the company has brought growth space and performance growth, and maintained the company's “buy” rating.

Risk warning: capacity construction falls short of expectations, downstream demand falls short of expectations, risk of product and raw material price fluctuations.