Investment highlights: The company announced its 2023 performance report. It is expected to achieve operating income of 972 million yuan in 2023, an increase of 13.87% over the previous year, and net profit attributable to shareholders of listed companies of 153 million yuan, a year-on-year decrease of 22.57%. Net profit after deducting non-recurring profit and loss was 137 million yuan, down 11.03% year over year. Basic earnings per share are expected to be $1.84.

Revenue grew steadily throughout the year, and performance declined slightly. The company is a leading enterprise in the adsorption molecular sieve industry in China. It is mainly engaged in R&D, production, sales and technical service of products related to molecular sieve adsorbents in inorganic non-metallic porous crystal materials. The products include molecular sieve raw powder, molecular sieve activated powder, molded molecular sieve and activated alumina, which are widely used in industrial gas separation, medical oxygen, energy chemicals, petrochemicals, environmental treatment and other fields. Since 2023, the company has focused on its main business, increased investment to implement the “internationalization strategy”, continuously strengthened technological innovation, actively explored the global market, and promoted a steady increase in sales and revenue of the company's core products. Furthermore, in recent years, the company has continued to promote research and development of new products. The product structure has been continuously enriched, and breakthroughs have been achieved in some products used in new fields and catalysts in the petrochemical field, opening up new growth space for the company. Driven by many factors, the company's product competitiveness and market share have been further improved, and the product structure has been improved, driving the company's annual revenue to increase 13.87% year-on-year.

In 2023, the company promptly adjusted its marketing model according to changes in the competitive environment in the market, and adopted a more active sales strategy to increase its market share. At the same time, the increase in the company's personnel expenses, marketing and R&D investment throughout the year led to a 26.62% year-on-year increase in the period expenses, putting some pressure on the annual profit.

Affected by this, the company's net profit for the year fell 22.57% year on year, and net profit after deduction fell 11.03% year on year.

Overseas business is growing rapidly, and the internationalization strategy continues to advance. In terms of the international market, the company is based on the Jianlong production base in Thailand, making full use of Thailand's location advantages to further promote the localization of production and marketing in Thailand, continuously improve “multi-market entry system certification” and “international brand cultivation work”, further promote market development services in the US, India, Europe and Central Asia, and expand the international market share of the company's products. In 2023, the company's overseas sales revenue increased by about 44.83% year on year, and Thailand's Jianlong annual revenue increased by about 44.92% year on year.

In addition, the company has reached large-scale sales and long-term cooperation with many large overseas gas manufacturers such as Linde Gas and French Liquid Air, and has completed the overall molecular sieve replacement business for Glencore's overseas oxygen production systems, gradually shifting from overseas sales to technology overseas. Currently, Thailand's Jianlong Phase II project is progressing in an orderly manner and is expected to be put into operation by the end of 2024. As the company's internationalization strategy continues to advance, it is expected to bring more room for growth in the company's performance.

The business layout continues to diversify, and the launch of new businesses ensures long-term growth. The company firmly follows a high-quality and differentiated development path, and continues to promote the development and layout of new products around molecular sieve adsorption and catalytic materials as the main research direction in the fields of energy, chemicals, petrochemicals, environmental management, etc. The company continues to increase R&D investment in new applications of molecular sieves, and has made good progress in 2023. In total, products such as automobile braking systems, air suspension systems, and molecular sieves for animal feed have been sold on a scale of one thousand tons. In the field of catalysts, the company's products have also achieved sales breakthroughs in the petrochemical field, completed the supply of molecular sieves for the second largest RNG project in the world and the largest RNG project in Asia at CNPC Changqing Oilfield and the Tarim Oilfield super-large RNG project, and achieved a successful operation. The launch and implementation of new products and projects has broadened the application scenarios of the company's products and further consolidated the company's leading position in the same industry.

Profit forecast and investment rating: The company's EPS for 2023 and 2024 is estimated to be 1.84 and 2.36 yuan, respectively. Based on the closing price of 40.50 yuan on February 28, PE is 22.05 times and 17.19 times, respectively. The company's valuation is reasonable. In line with the company's development prospects, it maintains the company's “increase in holdings” investment rating.

Risk warning: Downstream demand is insufficient, and the progress of new projects falls short of expectations