Incident: The company announced a preliminary increase in its 2024 semi-annual results. It is expected to achieve net profit of 0.334 billion yuan to 0.434 billion yuan in the first half of the year, an increase of 157.19% to 234.35% over the previous year; the deduction of non-net profit of 0.325 billion yuan to 0.423 billion yuan, an increase of 158.93% to 236.61% year on year. Among them, net profit due to mother is expected to be 0.18-0.28 billion yuan in the second quarter, up 63.64% to 154.55% year on year, and 16.88% to 81.82% month on month; after deducting non-net profit of 0.171-0.269 billion yuan, up 64.62% to 158.65% year on year, and 11.04% to 74.68% month on month.

The sharp rise in volume and price has helped the company to increase its performance. The HFCs quota system was implemented in 2024, and refrigerant prices rebounded significantly. According to Baichuan Yingfu's data, the average domestic sales prices of mainstream refrigerant varieties R32, R125, and R134a reached 0.0333, 0.0418, and 0.0313 million/ton respectively in the second quarter of 2024, increasing 128.32%, 68.32% and 32.56% year-on-year respectively. The increase in domestic sales prices led to significant growth in the company's performance. In addition, the company's refrigerant sales also increased year-on-year, volume and price rose sharply, and the company's performance increased significantly.

Downstream foreign trade exports remained strong. According to data from the General Administration of Customs, the export prices of R32, R134a, and R125 were 0.0183, 0.027, and 0.031 million yuan/ton in April-May this year, respectively, up 4.74%, 1.95%, and 4.18% from the average price in the first quarter. According to production schedule data, export orders for downstream refrigerant air conditioners remained strong. In June-July, the export sales schedule for air conditioners increased by 50.5% and 34.7%, respectively. Under the global warming environment, the export sales of air conditioners are expected to remain strong, which supports refrigerant prices, and the company's performance is expected to continue to grow.

Investment advice: The company's performance is expected to continue to improve as domestic and international demand grows. We expect the company's net profit to be 0.857, 1.213, and 1.423 billion yuan respectively in 2024-2026. The current price (2024/07/09) corresponds to PE of 28, 19, and 17, respectively, maintaining the “recommended” rating.

Risk warning: Market competition increases the risk, the risk of high dealer inventory, and the risk that downstream demand falls short of expectations.