Incident Overview

The company released its 2024 semi-annual report. In the first half of 2024, the company achieved operating income of 1.119 billion yuan, a year-on-year increase of 100.20%; net profit to mother was 0.168 billion yuan, an increase of 32.54% over the previous year. In Q2 2024, the company achieved revenue of 0.671 billion yuan, up 71.67% year on year, 49.66% month on month, and realized net profit of 0.107 billion yuan, up 16.57% year on year and 76.86% month on month.

The Baotou project ushered in a harvest period, helping to increase performance in the first half of the year

In the first half of 2024, the company achieved significant growth in revenue and net profit, mainly due to the commissioning and release of the Baotou “Selective and Integrated” project. The project achieved revenue of 0.639 billion yuan in the first half of the year, accounting for 57.12% of the company's revenue, accounting for 1.63% of the same period last year; contributed 59.1,499 million yuan in net profit to mother, accounting for 35.21% of the company's net profit to mother, accounting for 1.61% in the same period last year. The Baotou “Selective Integration” project has become an important performance growth point for the company. In the first half of 2024, the company's three Baogang Jinshi beneficiation production lines produced 0.2528 million tons of fluorite powder, Jinebo sold 0.0839 million tons; Jin'e Fluorine Chemical produced 0.0526 million tons of anhydrous hydrogen fluoride and sold 0.049 million tons. The average price of 2024Q2 anhydrous hydrofluoric acid has rebounded significantly. According to Baichuan Yingfu, the average prices in the Q1 and Q2 markets were 9750 yuan/ton and 10,750 yuan/ton respectively. Along with the release of production capacity and the recovery in product prices, the project is expected to further contribute to the company's performance.

Overall tight supply combined with the peak demand season. We are optimistic about the fluorite market in the second half of 2024. The company's single fluorite concentrate/sales volume will reach 0.1831/0.1593 million tons respectively, a decrease of 0.0221/0.0354 million tons from the same period last year. The main reason is that Changshan Jinshi, a holding subsidiary of the company, discovered 6 hidden accidents during on-site inspections and temporarily stopped production since May. After rectification, Changshan Jinshi has resumed production on August 8, and is expected to be released in the second half of the year. In terms of price, according to Baichuan Yingfu, the average market price of 97% fluorite wet powder in the first half of 2024 was 3,493 yuan/ton, an increase of 14.48% over the previous year. Supply is generally tight, and demand may grow, and fluorite prices are expected to rise. From the supply-side perspective, strict mine safety supervision may be a long-term limiting factor in the supply and release of fluorite. On March 10, the State Mine Safety Supervision Administration issued a notice to launch the national fluorite mine safety remediation. Key regions such as Hebei, Inner Mongolia, and Zhejiang are required to implement the three major measures of “closure and exit, integration and restructuring, and transformation and upgrading.” As a result of the special rectification, some mines stopped production or reduced production, and the supply of fluorite was tight in the short term. According to Baichuan Yingfu, in the first half of 2024, the total domestic fluorite production was 1.0481 million tons, a decrease of 0.1447 million tons compared to the same period last year. From the demand side, around October is the traditional peak demand season for downstream refrigerants, and fluorite prices are expected to rise in the second half of the year.

Investment advice

Maintaining the profit forecast, we expect the company's revenue for 2024-2026 to be 3.574/5.251/5.491 billion yuan, respectively, net profit to mother of 0.658/0.92/1.034 billion yuan, and EPS of 1.09/1.52/1.71 yuan, respectively, corresponding to the closing price of 25.42 yuan on August 13, PE 23/17/15 times, respectively. We are optimistic about the company's long-term development and maintain the “gain” rating.

Risk warning

Abnormal product price fluctuations, downstream demand falls short of expectations, project commissioning falls short of expectations, safety and environmental protection policy upgrades, etc.