A leading domestic hair dye company. The company has been deeply involved in hair dye ingredients for more than 20 years, has cooperated deeply with leading international cosmetic brands such as L'Oréal, Henkel, and Coti/Wella. It is now one of the world's leading producers of hair dye ingredients, and is actively expanding various special engineering material monomers such as polyimide and high-performance fibers. It is one of the few domestic manufacturers with the ability to independently produce PBO monomers; in the field of plant protection materials, the company has established long-term and stable cooperative relationships with well-known enterprises such as Combined Chemistry and ARYSTA.

New opportunities for hair coloring demand, leading customer resources+technical strength to build barriers. (1) Since 2023, with the normalization of epidemic prevention and control and the release of domestic demand for early suppression, domestic cosmetics retail sales reached 4142 billion yuan in 2023, an increase of 5.24% over the previous year, returning to the growth range. On the one hand, at present, domestic consumption of cosmetics per capita is still low. In 2021, the per capita domestic consumption of beauty and personal care was 62.4 US dollars. Japan and South Korea, which also have Asian skin, reached 262.6 US dollars and 266.2 US dollars, respectively, more than 4 times the domestic level. There is plenty of room for growth under the trend of future consumption upgrades. On the other hand, the domestic hair dye market is expected to continue to grow steadily due to the increase in the share of silver hair and the deepening public's emphasis on the appearance of their own instruments. (2) The company has strong technical strength and deep cooperation with leading international cosmetics manufacturers. Under the high technical threshold and customized product requirements, it can build a steady profit moat.

Diversified layout of special engineering material monomers helps long-term growth. (1) Domestic PBO fiber successfully achieved industrial production in 2018 after a long period of technical blockade. The company is one of the few domestic manufacturers with the ability to independently produce PBO monomers. Currently, it uses the resorcinol method to synthesize monomers, and plans to supplement it with 300 tons of trichlorobenzene production capacity. In recent years, the company's DHAB sales volume has benefited from domestic PBO downstream application breakthroughs, showing an overall upward trend; (2) benefiting from excellent comprehensive performance and processing performance, the global PI film market grew from US$1.52 billion in 2017 to US$2.24 billion in 2021, with a compound growth rate of 10%. The company mainly produces biphenylenediamine monomers, and its main customer is Mitsui Chemicals. The company has been cooperating as a supplier of its polyimide monomers for more than 20 years, and sales have maintained steady growth in recent years.

First coverage, giving a “gain” rating: The company is a leading domestic hair dye company, with a diversified layout of special engineering material units to open up long-term growth space. We expect the company's 2024-2026 revenue to be 885, 11.13, and 1,372 million yuan, respectively, and net profit of 2.20, 2.77, and 346 million yuan respectively. For PE, it is 23X, 18X, and 14X respectively. For PE, the first coverage is given.

Risk warning: Project construction falls short of expectations; demand falls short of expectations