Event: The company released its 2024 semi-annual report. In 2024 H1, the company achieved operating income of 112.539 billion yuan, an increase of 2.84% year on year; net profit attributable to shareholders of listed companies was 4.018 billion yuan, an increase of 31.77% year on year.

The product structure was adjusted flexibly, and revenue growth in sectors such as PTA was relatively rapid. In 2024H1, the company promptly adjusted raw material prices and changes in market demand, and flexibly adjusted raw materials, devices, and product structures, giving priority to increasing the production of high-efficiency products, and achieving “Yifang Zefang, Yifang Zefang, and Yihua Zehua”. By sector, the refining and chemical sector of 2024H1 achieved revenue of 45.997 billion yuan, -27%, and achieved sales volume of 8.5503 million tons, or -24%; the PTA sector achieved revenue of 38.732 billion yuan, +35%, achieving sales volume of 7.345 million tons, +30% year-on-year; and new material products achieved revenue of 21.062 billion yuan, +41% year-on-year, achieving sales volume of 2.599 million tons, or +47% year-on-year.

Production capacity for new materials is gradually being introduced, and efforts are being made to become the second growth pole. The company's 1.6 million tons/year high-performance resin and new materials project is expected to be fully put into operation in the second half of 2024. The fine chemical project focuses on the downstream extension of the carbon 2 industry chain and improvement of production capacity related to coal chemistry. It mainly includes bisphenol A, polycarbonates, electronic grade DMC, isopropyl alcohol, ethanolamine, ethylene amine, polyformaldehyde, acetic acid, PTMEG, etc., to achieve efficient penetration and deep links from raw material supply to process technology to the consumer market, reducing the proportion of the company's bulk chemicals and new material products. The 12-line functional film project at the Suzhou Fenhu base has been put into operation one after another. Another 12 functional film projects and lithium battery diaphragm projects at the Nantong base are progressing steadily. The projects are all expected to be completed and put into operation in the first half of 2025. The completion and commissioning of projects related to the Fenhu base and the Nantong base will lay a solid foundation for Kanghui New Materials to become the world's largest functional membrane materials company with the largest production capacity and the most advanced process technology.

Profit forecasting and investment ratings. We expect the company's net profit to be 9.5 billion yuan, 10.9 billion yuan, and 12.4 billion yuan respectively, EPS of 1.35 billion yuan, 1.55 billion yuan, 1.76 yuan, and 2024 BPS of 9.08 yuan. We maintain the “superior to market” rating according to the 2024 PB 2.1-2.3 times PB corresponding to a reasonable value range of 19.07-20.88 yuan (PE 14-15 times in 2024).

Risk warning: Crude oil prices fluctuate greatly; risk of large fluctuations in product prices; the process of projects under construction falls short of expectations.