Earnings in the interim report increased significantly. The company disclosed its 2024 mid-year report. During the reporting period, it achieved operating income of 1.009 billion yuan, an increase of 23.65% over the previous year, and realized net profit to mother of 0.191 billion yuan, an increase of 26.98% over the previous year. Among them, the second quarter achieved operating income of 0.577 billion yuan, an increase of 24.08% year on year, and realized net profit of 0.103 billion yuan to mother, an increase of 45.07% year on year. The main reason for the year-on-year increase in revenue and profit was that the company's sales volume increased 25.47% in the first half of the year. If large varieties that actually dragged down profits in the first half of the year were excluded, the sales growth rate of specialty surfactants reached 39.35%.

Competitiveness is prominent. The company's net profit not attributable to mother in a single quarter was 0.11 billion yuan during the 22Q2 global economic overheating period, then dropped sharply to 0.051 billion yuan in 22Q4 due to the macroeconomic environment. Since then, the company has responded positively, adjusted its product structure, and developed new growth points. Profits began to continue to rebound month-on-month, and net profit after deducting non-return income had recovered to 0.103 billion yuan by 24Q2. However, there has been no significant improvement in the macro industry situation in the past two years. We believe that the sharp recovery in the company's performance mainly depends on its excellent competitiveness.

It is expected to enter a new stage of growth. We believe that in a context where the reduction in overseas energy costs has led to a gradual recovery of the industry, and at the same time, domestic promotion of the development of new types of productivity. The company's innovation-driven fine chemical enterprises, which are oriented to meet the actual needs of customers, are expected to achieve excessive growth. The company is expected to enter a new stage of growth as the third plant (Kaimeiker project) enters the construction and commissioning period.

We forecast the company's 2024-2026 EPS forecast to be 0.70, 0.89, and 1.07 yuan. Comparable companies were valued at 15 times the price-earnings ratio in 2024. Considering that Real Madrid's historical return on investment and growth certainty were significantly better than comparable companies, they maintained a 20% premium, corresponding to 18 times the price-earnings ratio, and gave a target price of 12.60 yuan to maintain the purchase rating.

Risk warning

The commissioning progress of the new project fell short of expectations; raw material prices fluctuated greatly.