Incidents: 1) The company's stock price has risen sharply recently; 2) The company announced the suspension of production and maintenance of a liquid lithium hexafluorophosphate production line with an annual output of 30,000 tons.

Electrolyte faucets are expected to be the first to bottom out, and subsequent profits are expected to recover quarterly. Reviewing the two cycles experienced by the industry in 2012-2023, we believe that the electrolyte industry is already in the bottom range, and leading price profits and prices are expected to be ahead of the bottom of the industry. We believe that the first quarter was a low profit point for leading companies. With the subsequent increase in operating rates and the decline in raw material prices, the company's profits are expected to recover quarterly.

Production line maintenance is a normal annual inspection. At the same time, it indicates that the supply and demand structure of the industry has gradually improved.

The company stopped production and overhaul the 30,000 tons of liquid lithium hexafluorophosphate production line. We estimate that 30,000 tons of liquid hexafluorofluoride are equivalent to 10,000 tons of hexafluoroethylene. The company's remaining folding production capacity is about 7,500 tons per month, which can meet self-supply requirements. We believe that the company's maintenance during the trough period is to prepare for the gradual increase in the subsequent boom; at the same time, it can better maintain market share during the maintenance period (further showing that the price is already at the bottom and will be gradually repaired later). Optimistic about the sustainability of the company's cost advantage, it can grow through the industry's supply and demand cycle.

Investment advice: Considering the slowdown in the industry's growth rate and the large uncertainty in overseas markets, we lowered our profit forecast. The company's revenue for 2023/2024/2025 is 155/90/12.4 billion yuan, up -31%/-42%/+39% year on year; net profit to mother is 19/13/2.2 billion yuan (originally estimated 35.40/48.78/6.778 billion yuan), up -67%/-33%/+70% year over year. The corresponding EPS is 0.99/0.66/1.12 yuan, respectively. The current stock price corresponds to PE 21/32/19. Maintain a “buy” rating.

Risk warning: industry competition intensifies, downstream demand falls short of expectations