Net profit after deducting 2024H1 increased 15.19% year over year. The company released its 2024 semi-annual report. With 2024H1, the company achieved operating income of 5.672 billion yuan, a year-on-year increase of 9.04%, net profit to mother of 0.51 billion yuan, an increase of 27.98% year-on-year, and net profit after deducting 0.439 billion yuan, an increase of 15.19% over the previous year. The increase in the company's performance in the first half of the year was mainly due to an increase in product sales. Among them, the company's horticultural fertilizer business maintained medium to high speed growth in the first half of the year. In the first half of the year, it achieved retail sales of 66.03 million yuan, an increase of 25.50% over the previous year. The cumulative number of units sold was 2.6 million units, an increase of 32.65% over the previous year. With 2024Q2, the company achieved operating income of 3.044 billion yuan, a year-on-month increase of 15.80%, a year-on-year increase of 41.51%, net profit of 0.272 billion yuan, a year-on-year increase of 13.99%, a year-on-year increase of 47.40%, after deducting net profit of 0.231 billion yuan, an increase of 10.82% month-on-month and a year-on-year increase of 33.22%.

The gross margin of sales continues to grow. The company's gross sales margin continued to rise. The gross sales margin of 2024H1 was 18.59%, an increase of 1.39 pct over the previous year. Among them, sulfur-based compound fertilizer revenue was 1.161 billion yuan, up 11.61% year on year, gross profit margin was 17.66%, down 0.14 pct year on year; chlorine compound fertilizer operating income was 3.247 billion yuan, up 11.22% year on year, gross profit margin was 18.75%, up 1.47 pct year on year; revenue from new fertilizer and phosphate fertilizer products was 1.213 billion yuan, up 9.66% year on year, and gross profit margin was 19.52%, up 1.78 pct year on year.

The construction of the new project is progressing smoothly. 1) Iron phosphate, a precursor to new energy materials of Songzi New Materials Company, and its supporting projects: As of the end of June 2024, some of the devices in the project mainly include 0.4 million tons/year new special fertilizer unit, 1.8 million tons/year mineral processing unit, 2×0.6 million tons/year sulfur acid production device, 0.3 million tons/year wet phosphoric acid device, 2×0.2 million tons/year multi-element acidic physiological fertilizer device, 1.5 million tons/year phosphogypsum purification device The 0.05 million tons/year high-grade flame retardant fire protection material installation has passed stand-alone testing, joint commissioning and joint testing, and has entered the trial production stage. 2) Hubei Gold Storage Phosphogypsum Depot Project: Currently, the first phase of the phosphogypsum database project has been completed, and the western storage area is ready for use. 3) The new Lihe fertilizer industry project: It was completed and put into use at the end of last year, and production capacity was climbing in the first half of the year.

The company plans to build a new 1 million ton green fertilizer project. The company decided to use Guangxi Company as the project implementation entity to invest 533.7716 million yuan to build a new green fertilizer project with an annual output of 1 million tons through its own capital or bank financing. The main process equipment of the project includes a 2×0.2 million ton/year new slow release crop fertilizer production line, a 1×0.15 million ton/year new green crop special fertilizer production line, a 6×0.15 million ton/year new pharmaceutical fertilizer production line, 6×0.01 million tons/year high-quality potash fertilizer production line, 1×0.1 million tons/year high-element water-soluble fertilizer production line, 1×0.1 million tons/year high-element water-soluble fertilizer production line, 1×0.04 Million tons/year green ecological special fertilizer production line. The project construction period is 24 months. Through the construction of this project, the company can effectively reduce the company's production costs, improve the company's product structure, and further enhance the competitive advantage of the company's products in the South China, Southwest China and Southeast Asia markets.

Maintain profit forecasts. We expect the company's 2024-2026 EPS to be 0.68 yuan/share, 0.77 yuan/share, and 0.90 yuan/share, respectively. Referring to companies in the same industry, the company will be given 12.43 times PE in 2024, and the corresponding target price is 8.45 yuan (maintenance), maintaining the “superior to market” rating.

Risk warning. Product prices fell, downstream demand fell short of expectations, and raw material prices fluctuated.