Description of the event

The company released its 2024 semi-annual report. From January to June 2024, it achieved operating income of 3.313 billion yuan, a year-on-year increase of 3.31%; net profit to mother of 0.141 billion yuan, a year-on-year decrease of 56.82%; and net cash flow from operating activities of 0.249 billion yuan, a year-on-year decrease of 48.36%.

Among them, revenue for the second quarter of 2024 was 1.826 billion yuan, up 11.95% year on year and 22.80% month on month; net profit to mother was 0.089 billion yuan, down 50.06% year on year and 73.65% month on month.

Incident comments

Some of the new installations were successfully put into operation as scheduled, and the projects under construction progressed according to plan. During the reporting period, some of the company's new installations were successfully put into operation as scheduled. Among them, the 0.09 million ton/year VA unit was put into operation in January 2024; the 0.02 million ton/year UHMWPE unit was put into operation in March 2024. It has produced 5 grades of high-end diaphragm materials, fiber materials, etc., which are being tested by customers, and sales will gradually increase; the 0.01 million tons/year electronic grade high-purity special gas unit was successfully launched in May 2024, and the customer factory inspection was promoted simultaneously. The successive commissioning of these new installations will have a positive impact on improving the company's core competitiveness and enhancing profitability.

Demand for EVA continues to grow steadily, and there is plenty of room for future growth. According to data from the China Photovoltaic Industry Association, in 2023, China added 216.9 GW of PV installed capacity, up 152.0% year on year; module export volume was 208.1 GW, up 34.5% year on year.

According to Bloomberg New Energy's financial report, the world's new installed capacity will reach 444 GW in 2023, an increase of 76.2% over the previous year; the number of new global PV installations will reach 627 GW in 2025. According to Zhuochuang information, China's EVA production in 2023 was 2.154 million tons, with an apparent consumption of 3.339 million tons, an increase of 20.8% over the previous year, and import dependency was 41.7%. Over the next five years, total EVA demand is expected to grow at a compound rate of 9.2%, and total EVA demand will reach 5.55 million tons by 2028.

The company's new EVA production capacity is about to be implemented, and POE will be deployed in the future. The company's EVA products currently have a production capacity of more than 0.15 million tons/year. The device uses ExxonMobil kettle process technology, with a production capacity of 0.2 million tons/year. It is scheduled to be put into operation in 2025. The device uses LyondellBasell tubular process technology. Both sets of plants mainly produce products such as photovoltaic film materials with high added value. After 2025, the company's EVA production capacity will exceed 0.35 million tons/year. The company actively lays out the POE business, plans to build a 0.3 million tons/year PoE project, and produces a series of high-end olefin material products such as POE photovoltaic films and tougheners.

The company has broad room for future growth. 1. In the field of new energy: 1) The company's 0.2 million tons/year EVA production capacity is expected to be put into operation in 2025; 2) the 0.09 million tons/year VA unit successfully operated at full load in January 2024, and the EVA unit achieved complete self-supply of raw materials; 3) Actively lay out the POE business and plan to build 0.3 million tons/year PoE projects, including 0.1 million tons/year in the first phase and 0.2 million tons/year in the second phase to produce POE A series of high-end olefin material products such as photovoltaic film materials and toughening materials. The first phase of the project is expected to be completed and put into operation in 2025; 4) The company's 0.02 million tons/year ultra-high molecular weight polyethylene plant will be put into trial operation at the end of March 2024, and the 4000 tons/year VC plant for the lithium battery additive project is scheduled to be completed and put into operation in 2024. 2. In the field of biodegradable materials: 1) The 0.13 million tons/year PLA project under construction by the company, where the 0.1 million tons/year lactic acid unit and 0.04 million tons/year PLA unit are scheduled to be completed and put into operation in the first half of 2024; 2) The 0.05 million tons/year PPC unit under construction is scheduled to be completed and put into operation in 2025; 3. In the field of special fine materials: 0.01 million tons/year electronic grade high-purity special gas device was successfully completed and put into operation in May 2024 Drive a car.

Without considering future share capital expansion, the company's net profit for 2024-2026 is expected to be 0.35 billion yuan, 0.49 billion yuan, and 0.67 billion yuan. The PE corresponding to the closing price on July 26, 2024 is 50.2 times, 36.3 times, and 26.5 times, maintaining a “buy” rating.

Risk warning

1. EVA's boom falls short of expectations; 2. The construction progress of the project falls short of expectations.