Event: The company released its 2023 annual report and 2024 quarterly report. In 2023, the company achieved revenue of 2,778 billion yuan, -6.32% year-on-year, and realized net profit of 203 million yuan, or -233.72% year-on-year. With 2024Q1, the company achieved revenue of 793 million yuan, +90.69% year-on-year, and realized net profit of -99 million yuan, or -284.55% year-on-year. The sharp decline in the company's performance was mainly due to the receipt of a “Notice on Tax Matters” from the Ningbo Zhenhai District Taxation Office of the State Administration of Taxation requiring the company to pay consumption tax on “heavy aromatic hydrocarbon derivatives” as “heavy aromatic hydrocarbons.” Currently, the matter is still being actively communicated. Based on the principle of prudence, the company's financial statements are handled in accordance with the requirements of the “Notice on Tax Matters”.

Focus on the chemical industry segment and continue to promote industrial upgrading. The company is deeply involved in the field of deep petroleum processing, focusing on R&D, production and sales of specialty oil products. After more than ten years of development, the company now has a production capacity of nearly one million tons per year. The company deepens and broadens upstream and downstream channels, promotes investment in 1.6 million tons/year of new materials and high-end chemical projects, focuses on filling up shortcomings, building its own upstream and downstream integration advantages, enhancing the resilience and competitiveness of the industrial chain supply chain, and accelerating the development of specialized, refined, special and new market segments, building a corporate brand and comprehensively enhancing overall competitiveness.

Formulate shareholder dividend return plans for the next three years to reward investors. The company promises that in 2024-2026, after meeting the dividend conditions, dividends will be distributed according to the following rules: (1) If the company's development stage is mature and there are no major capital expenditure arrangements, cash dividends should account for at least 80% of the current profit distribution when profit distribution is carried out. (2) If the company's development stage is mature and there is a major capital expenditure arrangement, the cash dividend shall account for at least 40% of the current profit distribution when profit distribution is carried out; (3) If the company's development stage is long-term and there is a major capital expenditure arrangement, the cash dividend shall account for at least 20% of the current profit distribution during profit distribution. We believe that the company enhances the transparency and operability of profit distribution decisions, helps investors to form stable return expectations and reduce stock price fluctuations.

Profit forecasting and investment advice. The company is actively developing new products, and future production capacity will be launched one after another, and performance is expected to continue to grow. We expect the EPS of Bohui Co., Ltd. to be 0.14, 0.53, and 0.57 yuan from 2024 to 2026, respectively. Referring to the valuation level of comparable companies, they were given 3.5-3.6 times PB in 2024, with a corresponding reasonable value range of 10.89-11.20 yuan (the company's products are highly cyclical, the industry is currently less prosperous, and using PB valuation is more indicative than PE valuation), giving it a “superior to the market” rating.

Risk warning. Product prices fluctuate, downstream demand falls short of expectations, progress of projects under construction falls short of expectations, etc.