Incidents:

On August 22, 2024, Real Madrid Technology released its 2024 semi-annual report: in the first half of 2024, the company achieved operating income of 1.109 billion yuan, an increase of 23.65%; achieved net profit attributable to shareholders of listed companies of 0.191 billion yuan, an increase of 26.98%; and a weighted average return on net assets was 6.73%, down 0.89 percentage points from the previous year. The gross profit margin on sales was 25.23%, up 2.10 percentage points year on year; the net profit margin was 17.20%, down 0.45 percentage points year on year.

Among them, in 2024Q2, the company achieved revenue of 0.577 billion yuan, +24.18% year over month; realized net profit of 0.103 billion yuan, +44.11% year on year, +16.93% month on month; ROE was 3.64%, up 0.87 percentage points year on year and 0.48 percentage points month on month. Gross sales margin was 26.16%, up 4.00 percentage points year on year, up 1.94 percentage points month on month; net sales margin was 17.81%, up 2.46 percentage points year on year, up 1.28 percentage points month on month.

Investment highlights:

Focusing on the performance of special functional and polymer materials, the performance in the first half of 2024 increased steadily. In the first half of 2024, the company achieved net profit of 0.191 billion yuan to mother, an increase of 26.98% over the previous year.

In the first half of 2024, the company produced 0.0846 million tons of surfactants for special functional and polymer materials, with a sales volume of 0.0842 million tons, with an average sales price of 13167.85 yuan/ton, or -1.37%. Among them, the strategic emerging sector achieved sales volume of 0.0221 million tons, with an average price of 12930.27 yuan/ton.

In terms of raw materials, the average purchase price of ethylene oxide in the first half of 2024 was 5837.58 yuan/ton, +1.91% year over year, and the average purchase price of propylene oxide was 8241.05 yuan/ton, -6.06% year over year.

In terms of period expenses, the company's sales/management/R&D/finance expenses rates for the first half of 2024 were 0.42%/2.54%/3.78%/-0.64%, respectively, compared to -0.11/-0.52/-0.13/ -0.60pct. Financial expenses were mainly due to an increase in bank deposits in the current period, which led to an increase in interest income. In the first half of 2024, the net cash flow from the company's operating activities was 0.041 billion yuan, a year-on-year decrease of 78.59%.

The volume and price of the 2024Q2 special watch rose sharply month-on-month. We are optimistic that the annual results will be released in 2024Q2. The company achieved net profit of 0.103 billion yuan, +0.031 billion yuan year-on-year, and +0.015 billion yuan month-on-month; of these, it achieved gross profit of 0.151 billion yuan, +0.048 billion yuan year-on-year, and +0.022 billion yuan month-on-month. 2024Q2, the company sold 0.0437 million tons of surfactants for specialty functional and polymer materials, with an average sales price of 13188.25 yuan/ton, +0.32% month-on-month. Among them, the strategic emerging sector achieved sales of 0.0115 million tons, +9.25% month-on-month, and an average sales price of 12619.68 yuan/ton, -4.90% month-on-month. In terms of period expenses, 2024Q2's sales/management/ R&D/finance expenses were 0.02/0.014/0.023/ -0.007 billion yuan respectively, +0.00/+0.02/+0.006/-0.004 billion yuan year-on-year, and +0.00/+0.03/ -0.006 billion yuan compared to the previous month.

Factory No. 3 is being actively promoted, and the employee stock ownership plan shows development confidence. After years of development, the company has now become a leading specialty surfactant enterprise with large production scale, comprehensive variety, and high technological content in China. The company currently has two major production bases, Lukean and Real Madrid Shangyi, with an annual production capacity of nearly 0.3 million tons of specialty surfactants. The “Third Factory” Real Madrid Kaimeike project with an annual output of 0.33 million tons of high-end functional new materials is also being actively promoted. It is expected to produce 0.33 million tons of high-end functional new materials (0.12 million tons of high-end epoxy resin curing agent-polyether series products, 0.05 million tons of silicone polyether new material resin products, 0.03 million tons of allyl alcohol and derivatives, 0.015 million tons of ethylene glycol and derivatives, 0.02 million tons of resin Diluent products, 0.03 million tons of ethylene amine products, 0.01 million tons of methylepichlorohydrin products, 0.015 million tons of bio-based high-end surfactant products, 0.01 million tons of aerospace high-end resin new material products, 0.03 million tons of special polymer polyether new material products). The first phase of the project will produce 0.1685 million tons of high-end functional new materials per year, which will be tested before the end of 2025.

On July 18, 2024, the company released the second phase of the employee stock ownership plan (draft). The company-level performance assessment goals for this employee stock ownership plan are: 1) based on sales volume in 2023, with a sales volume growth rate of no less than 10.00% in 2024; 2) based on sales volume in 2024, the sales volume growth rate in 2025 is not less than 10.00%, demonstrating the company's long-term development confidence.

Profit forecasts and investment ratings

The company's revenue for 2024-2026 is expected to be 2.348, 2.762, and 3.312 billion yuan, respectively, and realized net profit of 0.402, 0.472, and 0.569 billion yuan, respectively, corresponding to PE, respectively. The company is currently a leading specialty surfactant enterprise with large production scale, comprehensive range, and high technological content in China. Factory No. 3 customers are actively promoting, optimistic about the company's growth, and maintaining the “buy” rating.

Risk warning

Risk of macroeconomic fluctuations; production capacity investment falling short of expectations; risk of product price fluctuations; risk of fluctuations in raw material prices; decline in future demand; progress of new projects falling short of expectations.