The company released its semi-annual performance forecast for 2024. It is expected to achieve net profit of 0.334-0.434 billion yuan in the first half of the year, an increase of 157.19%-234.35%; net profit without return to mother is expected to be 0.325-0.423 billion yuan in the first half of the year, an increase of 158.93%-236.61% year-on-year, and the performance is in line with expectations.

Prices of refrigerant products increased and prices of some raw materials declined, and the company's profitability is expected to increase markedly in the first half of the year. In 2024Q2, the company expects to achieve net profit of 0.18-0.28 billion yuan, +63.64% ~ +154.55% YoY, +16.88% ~ +81.82% month-on-month; net profit without return to mother 0.171-0.269 billion yuan, +64.42% ~ +158.65% YoY, +11.04% to +74.68% month-on-month. The company's second-quarter results are expected to achieve significant year-on-month growth, mainly due to: (1) the implementation of quota management for third-generation refrigerants in 2024, the company's refrigerant prices rose year on year in the first half of the year, and sales volume increased year on year. Combined with the year-on-year decline in prices of some major raw materials, the company's profitability is expected to increase markedly; (2) it is expected to obtain non-recurring profit and loss of 9.598 million yuan in the first half of the year, an increase of 5.504 million yuan over the previous year.

Prices of some third-generation refrigerants have rebounded recently, and maintenance demand is expected to support refrigerant prices to remain strong. According to Baichuan Yingfu's data, as of July 10, the price of R32 was 36,000 yuan/ton, up 5.88% from the previous low; the price of R134a was 30,000 yuan/ton, up 3.45% from the previous low, and the gross profit of both increased accordingly. The third quarter is a low season for new air conditioners, but refrigerant prices are expected to remain strong during the peak season for the maintenance market and the gradual consumption of quotas during the year.

Steadily advance project construction and enrich the fluorine chemical business layout. In 2023, the company's Fujian Dongying AHF expansion project, Chongqing Xinchen R32 product filling project, and Shengmei Lithium Battery Phase I 500t/a lithium bifluorosulfonimide (LiFSi) project have achieved trial production. At the same time, the company is steadily advancing the Zhejiang Sanmei 5,000 t/a polyperfluoroethylene propylene (FEP) and 5,000 t/a polyvinylidene fluoride (PVDF) projects, 0.09 million tons of AHF technical improvement projects; Fujian Dongying's 6,000 t/a lithium hexafluorophosphate (LiPF6) and 100t/a high-purity phosphorus pentafluoride (PF5) projects. The steady progress of the projects is beneficial to the company's rich business layout and expansion of the downstream industrial chain.

Investment advice: The company is deeply involved in the field of fluorine chemicals, has formed a fluorine chemical industry chain with independent support for anhydrous hydrogen fluoride, fluorine refrigerants, and fluorine foaming agents, and has become a major supplier in the industry. The company's basic earnings per share in 2024 are expected to be 1.36 yuan. The price-earnings ratio corresponding to the current stock price is 28 times, maintaining the purchase rating.

Risk warning: risk of large fluctuations in raw material prices; risk of fluctuations in downstream demand for automobiles, air conditioners, etc.; risk of weakening demand for some refrigerant varieties; risk of trade friction; risk of export volume falling short of expectations; risk of deteriorating industry supply and demand patterns, etc.