Maintain an “Overweight” rating. Currently, the company's inclined well repair work is still progressing in an orderly manner. Performance expectations are slightly lower due to short-term potash prices falling, and we are still optimistic that the company's growth will gradually be reflected. Based on the drop in potash prices and the calculation of export tariffs from Laos, we lowered the 2024-2025 EPS forecast to 0.94 yuan and 1.19 yuan (previously 2.32 and 2.69 yuan, respectively), and added the 2026 EPS forecast to 1.45 yuan. Comparatively, the company's average PE in 2024 was 11.7 times. Based on the company's higher production capacity flexibility and ceiling, we gave the company 20 times PE in 2024, and the corresponding target price was reduced to 18.85 yuan.

The semi-annual results were slightly lower than market expectations. The company expects to achieve net profit of 0.22-0.33 billion yuan in the first half of 2024, a year-on-year decrease of 53.94%-69.29%. Among them, net profit from mother for the second quarter was 0.139-0.249 billion yuan, an increase of 71.22%-206.73% over the previous quarter. The company's production and sales volume both increased year on year in the first half of the year. The year-on-year decline in performance was mainly due to the decline in potash fertilizer prices and the Lao government's imposition of export tariffs on potassium chloride.

Construction and production are progressing in an orderly manner, and restoration work is expected to be completed in 2024. According to the Company's Investor Q&A section's response on June 13, 2024 to the main inclined well sediment problem, it is expected to be completed within 2 #主斜井的治水与井巷修复工作可能在2024, while the company strives to complete the mine in the fourth quarter of 3 #主斜井在2024. At present, the average daily production of the company's potash fertilizer is about 5000-6000 tons. The company is steadily solving the problem of water seeping while unswervingly expanding production capacity by 5 million tons.

Successfully expanded the Brazilian market and further strengthened sales channels. On the sales side, the company not only signed supply and marketing cooperation framework agreements with leading domestic compound fertilizer companies and potash traders, but also signed global potash supply and marketing cooperation framework agreements with overseas fertilizer giants such as KC Group and Samsung Group. Previously, the company's main sales regions were domestic and Southeast Asia, and the successful entry into the Brazilian market created a new market space for the company's potash fertilizer sales. According to the 2023 Fact Book published by Nutrien, Brazil's potash imports reached 11.066 million tons in 2022, with an average potash import volume of 11.522 million tons in 2020-2022, making it the world's largest potash importer. Also, the price of potassium chloride in Brazil is higher than in Southeast Asia.

Risk warning: falling agricultural product prices, falling potash prices, etc.