The company released its 2024 quarterly report, and the results were in line with expectations. 1Q24 achieved operating income of 448 million yuan (yoy +166.5%, QoQ -39.6%), net profit to mother of 61 million yuan (yoy +74.9%, QoQ -41.1%), net profit after deduction of 61 million yuan (yoy +83.4%, QoQ -40.8%), and management expenses increased 41.06% year over year to 0.26 million yuan. The overall sales margin of 1Q24 decreased 24.14 and 1.75pct to 20.61%, respectively. The main reason for the year-on-year increase in 1Q24 revenue was due to the sales of anhydrous hydrogen fluoride by Jin'e Bofluoro Chemical and the foreign sales of Baogang Jinshi Fluorite powder to generate trade revenue. The reason for the year-on-year increase in net profit due to the commissioning of the Baotou “Selective Integration” project contributed to incremental performance, but the overall gross margin of the new business declined because the overall gross margin of the new business was lower than that of mining a single fluorite mine.

The 1Q24 company's self-produced fluorite powder production and sales declined slightly year on year, but fluorite prices rose year on year, and profits were basically stable year over year. Recently, fluorite inspection efforts have been strengthened across the country, supply and demand for fluorite are tight, and prices continue to rise. The 1Q24 company produced its own fluorite concentrate of about 56,000 tons and sold about 54,000 tons. However, the price of fluorite rose year on year. According to Zhuochuang News's quotation, domestic fluorite prices increased 12% year on year to 3,262.5 yuan/ton in 1Q24, so the overall net profit of the self-produced fluorite business remained stable year on year. The company's single fluorite mine plans to produce 400,000 to 500,000 tons of various fluorite products in 2024.

In March 2024, the General Department of the State Mine Safety Supervision Administration issued a notice to carry out special work safety remediation in fluorite mines. The period of special remediation is from March 2024 to August 2024. The closure and withdrawal of one batch, integration and restructuring, and upgrading of a batch of “three batches” will strongly promote the stability and improvement of the safety production order of fluorite mines. China's fluorite mines are scattered all the time. Starting from March, the domestic price of fluorite continued to rise. According to Zhuochuang information, domestic fluorite prices continued to rise. Cumulative increase compared to the beginning of March From 325 yuan/ton to 3,550 yuan/ton, it is expected that safety inspections will further shut down irregular mines. At the same time, the price of downstream fluorite refrigerant products continues to rise due to quotas, and it is expected that fluorite prices will continue to rise in the future. The company has disclosed foreign investment announcements to invest in the development of Mongolian fluorite resources. The project began the company's first step in “integrating scarce global resources”, and the amount of fluorite ore produced by itself will continue to increase in the future.

Jiangxi Jinling Lithium, Jin'e Bofluorine Chemical, and Baogang's “selective integration” projects have all been sold, making 1Q24 incremental results. According to the company's disclosure, the 1Q24 Baotou “selection and integration” project produced about 125,000 tons of fluorite powder, 23,800 tons of anhydrous hydrogen fluoride, sold about 24,000 tons of anhydrous hydrogen fluoride, and sold 41,400 tons of fluorite powder to the outside world (excluding the self-use portion of Jin'e Fluorine Chemical). The domestic market price of anhydrous hydrogen fluoride in 1Q24 is at a low level of 9,000-9500 yuan/ton. With the beginning of the downstream peak season in the second quarter, the market price has now risen to about 11,000-11,500 yuan/ton. It is expected that the volume and price of anhydrous hydrofluoric acid will rise sharply in 2Q24. In 1Q24, Jinling, Jiangxi produced 0.95 million tons of lepidomite concentrate (16,800 tons in a single 4Q23), sold 0.56 million tons of lithium mica concentrate (4Q23 sold 0.33 million tons in a single quarter), with a gross margin of about 20%. As of 1Q24, the inventory of lithium mica concentrate was 32,700 tons. Subsequently, as the load of new projects increased, the company's future performance continued to grow. As of 1Q24, the number of projects under construction by the company decreased by 162 million yuan to 707 million yuan compared to the end of 2023.

Investment analysis: Due to increasingly stringent domestic production safety requirements, fluorite prices are expected to continue to rise. The company will invest in the field of associated fluorite resources and lithium extraction from lithium mica fine mud through technological transformation, invest in the development of Mongolian fluorite resources, further promote the “resource+technology” two-wing driving strategy, further cultivate the two major strategic resources of “fluorite+lithium”, and expand the layout of fluorine chemicals and new energy fields downstream to open up new upstream and downstream growth space. We maintain the company's 2024-2026 net profit forecast of 635, 8.55, and 1,026 million yuan. The corresponding EPS is 1.05, 1.41, and 1.70 yuan, respectively, and the PE corresponding to the current stock price is 30X, 22X, and 18X, maintaining an increase rating.

Risk warning: 1. The price of fluorite continues to fall; 2. Environmental enforcement is not in place, and the resumption of production in various regions exceeds expectations; 3. Production and sales of downstream air conditioners, automobiles, etc. continue to decline; 4. The progress of new projects falls short of expectations; 5. The company announced on August 29 that the company and its wholly-owned subsidiary Jiang Shan Jinshi had received litigation materials delivered by the court. Guangzhou Tianci Hi-Tech Materials Co., Ltd. and Jiujiang Tianci Hi-Tech Materials Co., Ltd. filed a civil lawsuit with the Guangzhou Intellectual Property Court on a dispute involving infringement of technical secrets, requesting the court to order the three defendants, including the Company, to pay compensation of RMB 90 million for economic losses RMB and $802,000 in examination fees, investigation fees and legal fees paid by the plaintiff to defend her rights. The Company achieved net profit of 351 million yuan after deduction from mother in 2023. It is a lawsuit with potentially significant impact.