With special molecular sieves as the core, it has been deeply cultivated for 16 years to become one of the leading domestic molecular sieve catalysts. The company was founded in 2008 and is one of the main manufacturers in the field of catalyst production in China. Its main business is the development and sale of catalysts and the provision of corresponding technical services. The application fields include environmental protection, energy and chemical industries. The company's core products are special molecular sieves and catalysts. In 2022, sales revenue was 639 million yuan, accounting for 93.84% of the main business revenue, with mobile source denitrification molecular sieves accounting for a relatively high proportion.

Under the trend of domestic catalyst substitution, the company actively invests in R&D, innovation and rapid development. Compared with the development of the foreign catalyst industry, there is still a certain gap in the development of China's catalyst industry. The country has actively introduced relevant policies to promote the development of new materials and catalysts industries. The company seizes this opportunity to promote innovation with a perfect research platform, a strong research team, and an integrated internal and external R&D model. It has successively launched a variety of products with independent intellectual property rights, achieved domestic substitution, and at the same time formed a deep technical reserve.

Exhaust emission standards are becoming more stringent, and mobile source denitrification business prospects are good. With increasing environmental awareness, domestic and foreign diesel vehicle exhaust emission standards are becoming more and more strict. China has moved from “country 5” to “country 6,” and the size of the exhaust gas denitrification market is gradually expanding. Zeolite catalysts have obvious advantages and are expected to become mainstream SCR exhaust denitrification products under the “National Six” standard. As the exclusive supplier of BASF Mobile Source Denitrification Zeolite in the Asian market, the company should have a large market share in the Asian denitrification catalyst market.

The HPPO method has significant advantages, and titanium-silicon zeolite has been replaced by domestic production. The company's titanium-silicon zeolite catalyst is used to synthesize propylene oxide by the HPPO method. Compared with the highly polluting chloroalcohol method and the co-oxidation method, which is subject to co-products, the HPPO method has the characteristics of being green and environmentally friendly, and is expected to cost mainstream processes. The company broke the technology monopoly and realized the localization and replacement of HPPO catalysts. Compared with foreign catalysts and supporting processes, the company's products have strong cost and technical advantages.

Investment advice: According to the above forecast, we expect China Catalyst's 2023-2025 revenue to be $549/8.14/1,018 million yuan, YOY -19.30%/48.16%/25.11%, respectively, net profit to mother of 0.77/1.60/210 million yuan, YOY of -49.50%/108.77%/25.33%, respectively, and corresponding EPS of 0.43/0.91/1.14 yuan respectively. Combined with the company's closing price on March 19, 2024, the corresponding PE was 48/23/18 times, respectively. First coverage, giving a “buy” rating.

Risk warning: risk of customer concentration, risk of impact on traditional energy vehicles, risk of lagging implementation of environmental protection policies, risk of technology iteration