Non-net profit decreased by 58.11% year-on-year in '23, and non-net profit after deducting non-net profit increased by 2690.02% year-on-year in 24Q1. In 2023, the company achieved revenue of 550 million yuan, a year-on-year decrease of 19.21%; realized net profit attributable to mother of 76.9120 million yuan, a year-on-year decrease of 49.34%; realized deducted non-net profit of 53.6898 million yuan, a year-on-year decrease of 58.11%. With 2024Q1, the company achieved revenue of 199 million yuan, up 61.19% year on year; realized net profit of 35.656 million yuan, up 1610.19% year on year; realized deducted non-net profit of 343.32 million yuan, up 2690.02% year on year. The company's total dividend amount in 2023 was 87.31 million yuan, accounting for 113.52% of net profit returned to mother in 2023.

Actively expand the business layout. On the basis of existing products, the company actively promotes the development and mass production of various environmentally friendly new material molecular sieves and catalyst products such as fixed source denitrification molecular sieves, VOCs catalysts, ethylene glycol catalysts, etc., fine chemicals such as metocresol, high-purity silicon oxide, high-purity alumina, and metal catalyst products such as TRH special molecular sieve products, iron-molybdenum catalysts, nickel-copper catalysts, and maleic anhydride catalysts.

We always insist on focusing on innovative research and development. The company always insists on innovative research and development, improving independent innovation capabilities, promoting product upgrading, and meeting market needs. It is committed to developing upgraded products with better performance and lower energy consumption. In 2023, the company's R&D expenses were 475.349 million yuan, accounting for 8.64% of revenue. The proportion of R&D expenses in revenue increased 1.36 percentage points over 2022. By the end of 2023, the company and its wholly-owned subsidiaries had obtained a total of 221 authorized patents, including 166 invention patents in China, 3 PCT international patents, and 52 utility model patents.

Projects under construction have laid the foundation for the company's growth. 1) Industrialization project for special molecular sieves, environmentally friendly catalysts, and automobile exhaust purification catalysts: The production capacity is 3,000 tons of special molecular sieves, 1,000 tons of environmentally friendly catalysts, and automobile exhaust purification catalysts. It is expected to be completed in December 2023. 2) New environmentally friendly materials and intermediates project: The production capacity under construction is 3,300 tons of special molecular sieves and catalysts, 3,200 tons of non-molecular sieve catalysts, and 10,000 tons of fine chemicals; on March 21, 2024, the preliminary procedures required for the construction of the new environmentally friendly materials and intermediates project have been completed. Based on the principle of prudence, and taking into account the actual progress of the current fund-raising investment project and the use of funds, the company decided to adjust the “Environmental New Materials and Intermediates Project” for the fund-raising project to February 2026 while keeping the implementing entity, total investment amount, and use of capital of the fund-raising investment project unchanged.

Profit forecast. As sales volume fell short of expectations, we lowered our performance. We expect the company's net profit to be 1.51 (-63%), 1.81 (increase), and 217 million yuan (increase) for 2024-2026. Referring to the valuations of comparable companies in the same industry, considering that many of the company's projects under construction are growing and give a certain valuation premium, we will give 2024 30 times PE, with a target price of 25.80 yuan (the previous target price was 55 yuan, corresponding to 49.4 times PE in '22, -53%) to maintain the “superior to the market” rating.

Risk warning. Market competition intensifies; raw material prices fluctuate; market prices fluctuate.