Earnings declined slightly in 2023. In 2023, due to pressure from downstream market demand, etc., the company's product prices declined. The company achieved operating income of 6.778 billion yuan, -16.91% year-on-year; net profit to mother was 446 million yuan, or -48.50% year-on-year. The company plans to pay a cash dividend of 0.80 yuan (tax included) for every 10 shares.

EVA production and sales increased year over year. In 2023, the company's EVA production and sales volume was 1605/1602 million tons, up 12.8%/12.7% year on year; production and sales volume of polypropylene special materials were 24.82/247,900 tons, down 4.5%/5.5% year on year respectively; production and sales of ethylene oxide derivatives were 15.69/149,500 tons, respectively, up 5.6%/5.4% year on year.

EVA's profit declined. In 2023, market demand slowly recovered, and the price difference of the company's EVA products declined somewhat. The average price per ton of EVA was 12,600 yuan, down 36.6% year on year; gross profit per ton was about 5,174 yuan, down 49.2% year on year.

1Q24 earnings declined year over year. In the first quarter of 2024, the company achieved operating income of 1,487 million yuan, -5.64% year on year, and realized net profit of 51 million yuan, or -65.05% year-on-year. The decline in the company's profit was mainly due to a year-on-year decrease in government support funds and parking maintenance of some devices (EVA, EO/EOD).

A new material platform enterprise with a high-end and differentiated layout. The company focuses on the fields of new energy materials (such as photovoltaic materials, new energy battery materials, etc.), biomaterials (such as biodegradable materials, biomass materials, etc.), and other special fine materials (such as electronic materials, special engineering plastics, etc.) to build a new material platform enterprise. At present, the company's current and planned product matrix mainly includes: (1) photovoltaic film raw materials, vinyl acetate-EVA industry chain, POE; (2) lithium battery materials, lithium carbonate lithium battery additives, ultra-high molecular weight polyethylene UHPE; (3) biodegradable materials: PLA, PPC; (4) special fine materials: high-purity electronic special gas, etc.

It is expected that key construction projects will gradually be put into operation in 2024-2025, contributing to the increase. The main projects being built by the company include 200,000 tons/year EVA, 300,000 tons/year POE, 130,000 tons/year PLA, 300,000 tons/year PO, 50,000 tons/year PPC, 10,000 tons/year high-purity electronic special gas, and 4,000 tons/year lithium battery additives. The project is expected to be gradually completed and put into operation after 2024.

Profit forecasting and investment ratings. We expect the company's EPS to be 0.37, 0.45, and 0.85 yuan respectively in 2024-2026, and 5.61 yuan for BPS in 2024. Referring to comparable company estimates, according to the 2024 0.86-0.88 times PEG, a reasonable value range of 16.41-16.79 yuan (corresponding to 2024 PE 44-45 times, PB2.9-3.0 times) was given to maintain the “superior to market” rating.

Risk warning: Product prices fluctuate greatly; progress of new projects falls short of expectations; prices of upstream raw materials fluctuate greatly.