The company achieved net profit of 0.27 billion yuan in the first half of the year, up 5.23% year on year. The company achieved revenue of 3.55 billion yuan in the first half of the year, down 4.44% year on year, realized net profit of 0.27 billion yuan year on year, up 5.23% year on year, after deducting net profit of 0.26 billion yuan without return to mother, up 1.73% year on year. Among them, Q2 achieved revenue of 1.77 billion yuan, down 1.96% year on year, and realized net profit to mother 0.1 billion yuan year on year. The decline was 39.8%.

Glass's performance turned a loss into a profit, and the chemical sector declined

1) Glass sector: The first half of the year achieved revenue of 2.351 billion yuan, which was basically the same as the previous year. Net profit was 0.15 billion yuan, turning a loss into a profit over the previous year. According to Zhuochuang information, the average price of 5mm plain white float glass in the second quarter was about 88 yuan/heavy box, -22%/-17% year over month, mainly affected by the decline in completion boom and increase in supply. The company has various products of plain white, ultra-white, and photovoltaic glass, which have obvious structural advantages. Among them, ultra-white products concentrate on producing 15-19mm oversized ultra-thick panels, which are more profitable. In terms of photovoltaic glass, while maintaining process stability, Ningxia Jinjing Photovoltaic Glass increased development efforts for new customers, and achieved net profit of 15.26 million in the first half of the year, an increase of 14.7% over the previous year; Malaysia Jinjing continued to provide major customer service, reduce costs and increase efficiency to ensure operational stability, and achieved net profit of 38.66 million yuan in the first half of the year, an increase of 53.2% over the previous year. TCO Glass continued to advance overseas customer business progress. 2) The soda ash sector achieved revenue of 1.639 billion yuan in the first half of the year, down 17.8% year on year. Affected by increased supply, soda ash prices fell rapidly in the first half of the year. We calculated a 20% year-on-year decline. In the first half of the year, the chemical sector achieved net profit of 0.228 billion yuan, a year-on-year decrease of 18%. In the second half of the year, with the recovery of maintenance capacity and the release of new production capacity, supply and demand conflicts still exist, and prices may still be under pressure.

Gross margin increased year-on-year, and expense ratios increased slightly

The company's overall gross profit margin in the first half of the year was 20.09%, up 3.23 pcts year on year. Among them, Q2 gross profit margin was 18.18%, -2.35/ -3.83 pct year on year, and the overall cost ratio for the first half of the year was 8.3%, up 1.25 pct year on year. Among them, sales/management/ R&D/financial expense ratios were +0.03/+0.35/+0.11pct year on year, respectively. The increase in management expense ratio was mainly due to an increase in employee remuneration. The overall net profit margin in the first half of the year was 7.83%, a year-on-year decrease 0.73 pct, of which the glass sector had a net interest rate of 6.2% and the soda ash sector had a net interest rate of 14.3%, an increase of 0.3 pct over the previous year.

Optimistic about the company's medium- to long-term growth and maintain a “buy” rating

The company has the advantage of integrating the soda ash and glass industry chain. Through product restructuring, profitability has been continuously enhanced. In the first half of the year, the net profit volume of the Ningxia PV Glass and Malaysia base was stable, and TCO Glass still has medium- to long-term growth potential. Considering the decline in construction glass prices, the 24-26 net profit forecast was lowered to 0.5/0.7/0.86 billion yuan (previous value 0.51/0.75/0.93 billion yuan), giving the company 1.6 times PB in 24 years, and the target price was 7.01 yuan, maintaining the “buy” rating.

Risk warning: Downstream demand falls short of expectations, industry competition intensifies, production costs rise sharply, etc.