Incidents:

The company announced operating data for January-May 2024. From January to May '24, the company signed a new contract amount of 167.4 billion yuan, +18.1% year-on-year, and 16.6 billion yuan in a single month in May '24, -2.7% year-on-year.

The number of new contracts signed in January-May increased by 18.1% year-on-year, and the growth of new contracts signed in chemical engineering remained resilient: in January-May '24, the amount of new contracts signed by the company was 1598/16/34/5 billion yuan, +18.9%/-31.2%/+13.2%/-65.2% year-on-year; in May '24, the amount of new contracts signed by the company was 157/2/6/1 billion yuan, compared with the same period in May '24. +0.8%/-13.8%/-13.0%/-87.4% Among construction engineering contracts, new contracts for chemical engineering/infrastructure/environmental management were +18.6%/-17.0% YoY in January-May '24, and +13.5%/-31.9%/-95.3% YoY in May.

The number of new contracts signed overseas continued to increase, and the increase in new domestic contracts was under pressure: from January to May '24, the number of new domestic and overseas contracts was 1308/36.7 billion yuan, -2.8%/+410%. In a single month of May '24, the company signed new domestic/overseas contracts amounted to 112.54 billion yuan, -32.9%/+1256% year-on-year. The company continued to make efforts overseas. It won two Indonesian projects and one Russian project in May, achieving a high year-on-year increase under a low base. The growth of new contracts signed within the company was under pressure. The year-on-year decline in new contracts signed by the company in a single month in May was 4.2 percentage points higher than the previous month, causing the cumulative number of new contracts signed in January-May to turn negative year on year, and the domestic market was under pressure.

The industrial business load continues to increase, and the company's industrial business load continues to increase. As of the end of May '24, the adiponitrile project was operating at 45% load and the aerogel project was operating at 83% load. The company actively lays out strategic emerging industries such as new materials, industrial software, new energy, energy saving and environmental protection, high-end equipment manufacturing and related service industries, actively explores “stuck neck” technology, independently develops butadiene phthalonitrile “stuck neck” core technology, and invests in the construction of an integrated hexanitrile and nylon series industrial base in Shandong to break the dilemma of adiponitrile completely dependent on imports, and simultaneously lay out high-temperature nylon, long-chain nylon, flame retardant nylon material technology research and development. 5000 tons/year nylon 12 units have entered the testing stage; Battery panel key The raw material cold hydrogenation polysilicon production technology has reached the international advanced level, and production costs have been reduced by 95%. China Tianchen, a wholly-owned subsidiary of the company, has won the “Science Reform Action” benchmark four times in a row. The revenue growth rate of the new industry in 2023 reached 44.77%, and its scientific and technological research and development strength is strong.

Profit forecast, valuation and rating: The overall growth of the company's new contracts has remained high. We are optimistic about the company's overseas expansion and industrial business development, maintain the 24-26 net profit forecast of 58.9/64.2/7.12 billion yuan, and maintain the “buy” rating.

Risk warning: the risk of a sharp drop in the price of adiponitrile products, the risk of industrial projects falling short of expectations, the risk of large fluctuations in the price of engineering raw materials, etc.