Incident: The company released its 2024 quarterly report. In 24Q1, it achieved revenue of 587 million yuan, +1.0%/+11.5% YoY, and realized net profit of 154 million yuan, -0.1%/+28.4% YoY, minus 145 million yuan in non-net profit, +0.2%/-3.5% YoY.

Q1 The average price fell slightly month-on-month, and increased sales helped increase revenue. 24Q1's sales volume of finished functional silane products was 29,600 tons, +21.4%/+14.2% YoY, and the average price was 19,500 yuan/ton, -17.6%/-2.6% YoY. Prices of raw materials are differentiated. The average purchase price of anhydrous ethanol/metallic silicone/superior grade chloropropylene/allyl glycide/trichlorosilane was -6.36%/+2.49%/-3.94%/+0.95%/+1.02%, respectively. The company's 24Q1 gross margin was 34.03%, -5.30/ -7.17pct. Affected by a sharp reduction in the total expense ratio, the net interest rate was basically the same year on year. The 24Q1 sales/management/R&D/finance expenses ratio was 0.76%/3.36%/-3.15%, respectively, the total cost ratio was 4.26%, -5.78/-3.98pct, net margin was 26.30%, -0.28/+3.46pct month-on-month.

Expanding production, reducing costs, and promoting new products. The logic of growth is threefold. The company has a triple growth logic. One is that production capacity growth helps increase sales. The company's current production and sales rate has remained high. The production and sales rate in the past year was close to 100%, benefiting from partial production of fund-raising projects. By the end of 23, the company's production capacity of finished functional silane products reached 107,000 tons, helping Q1 sales to grow. The second is cost reduction. The second is cost reduction. Currently, the company still needs to outsource trichlorosilane. The first phase of the company's new silicon-based materials green recycling industrial park project plans to produce 60,000 tons of hydrogen trichlorosilane per year 6000 tons of silicon tetrachloride, which can be mitigated The company's current supply of functional silane cannot fully meet customer needs due to insufficient production capacity of trichlorosilane, and can also extend the industrial chain to further reduce costs; third, it has launched a new product, with 2,000 tons of high-purity quartz sand under construction. The company has also mastered functional silane technology in high-end fields such as boron-containing additives and heat-resistant additives by purchasing patents from the Chinese Academy of Sciences, and the product line is expected to be further enriched.

Investment advice: The first quarter results are in line with expectations. We maintained a 24-26 net profit of 6.32/7.45/893 million yuan, corresponding to the current PE of 14.8/12.5/10.5x, respectively. The company maintained high profitability at the bottom of the industry. We are optimistic about the company's development potential for a long time and maintain a “buy” rating.

Risk warning: Production capacity release falls short of expectations, raw material prices fluctuate, and downstream demand falls short of expectations.