The core business blossomed, and the first coverage gave it a “buy” rating

The company is an integrated platform for research institutes, and businesses such as high-end manufacturing chemical materials/high-end fluorine materials/electronic gas/carbon emission reduction are developed collaboratively. We believe: 1) the company is leading in high-end fluorine materials in China, and the acquisition of Sinochem Blue Sky will consolidate integration and scale advantages, and benefit from the rising HFCs boom; 2) the company's high-end manufacturing chemical materials business has differentiated competitive advantages, high technical and customer barriers, and aviation tires, special coatings, etc. are expected to benefit from domestic substitution; 3) many new projects in 23-25 ushered in a harvest period, leading a new round of growth, and the company maintains a high dividend rate, and is expected to be revalued in the context of deepening reform of state-owned enterprises.

We expect the company's net profit to be 9.3/11.7/1.48 billion yuan in 23-25 years (not considering the impact of Blue Sky asset injection), which is comparable to the company's 24-year average estimate of 26xPE. Considering the company's competitive advantage in the field of high-end materials, we will give it a 24-year 33xPE with a target price of 42.24 yuan, giving it a “buy” rating.

High-end fluorine materials continue to break through, integrate Blue Sky to create synergistic advantages and benefit from HFCs Gaojingqi's high-end fluorine materials/electronic gases, and gradually achieved high-end breakthroughs. Among them, fluorine material production capacity is leading domestically, and high-end products such as PTFE/fluororubber help import substitution; the quality of products above grade 5N is leading domestically. Future production capacity expansion will consolidate its leading edge. Along with the injection of Sinochem Blue Sky assets, business synergy is expected to build a leading fluorine chemical enterprise with a complete industrial chain. Meanwhile, under the quota system, third-generation refrigerants (HFCs) have entered a boom cycle since 24, and Sinochem Blue Sky's 24-year HFCS quota is 102 thousand tons (3rd in China), which is expected to fully benefit in the future.

High-end manufacturing chemical materials have significant differentiated competitive advantages. Companies with broad carbon emission reduction business prospects are scarce domestic aviation materials suppliers. Relying on the platform advantages of research institutes and continuous R&D investment (18-9M23 R&D cost rate is higher than 7%), aviation tires, special coatings, sealing profiles, plexiglass and other businesses have taken the lead in helping domestic substitution. They have now entered the C919 and ARJ21 supply systems, and have high technical and customer barriers. As downstream applications and domestic substitution advance, the company's competitive advantage and profitability are expected to continue to improve. The company's PSA (variable pressure adsorption) business is also at the forefront of the world, expanding its capacity boundaries to hydrogen energy/exhaust gas recovery/carbon capture, etc., with significant potential for future growth.

New projects lead future growth. Deepening reform of state-owned enterprises helped value revaluation company profits grow steadily after business restructuring in '18. Net profit CAGR reached 21%/22% in 19-22, and many new projects were released centrally in 23-25, including Haohua Gas 4,600 tons/year electronic gas, Zhonghao Chenguang 2,500 tons/year PVDF, Limingyuan 46,600 tons of special new materials, Chenguangyuan 26,000 tons of organic fluorinated materials, Chenguangyuan's 26,000 tons of organic fluorine materials, Shuguangyuan's 100,000 ties/year civil aviation tires, Northwest China Academy silicone sealants, etc. Helping a new round of growth . The company has long focused on shareholder returns. In addition to the 18-year business restructuring, the dividend rate for 12-22 was over 30%. With the incremental release of new projects and blue sky asset injection, profits are expected to rise again and help maintain good shareholder returns. As a new materials platform company under Sinochem, the company's long-term investment value is also expected to be highlighted in the context of deepening state-owned enterprise reform.

Risk warning: The progress of the new project falls short of expectations; competition for fluorine materials etc. intensifies; the restructuring progress falls short of expectations.