Incident: The company released its 2024 semi-annual report. 24H1 achieved operating income of 3.582 billion yuan, +4.35% year-on-year, and realized net profit of 0.416 billion yuan, or -19.54% year-on-year. Among them, 24Q2 achieved operating income of 2.067 billion yuan, +15.75% year over year, and +36.41% month on month; realized net profit of 0.251 billion yuan to mother, -7.54% year on year, and +51.97% month on month.

Electrolyte prices continued to fall, 24H1's profit declined, and Q2 profit improved month-on-month. 24H1 was affected by the rapid release of production capacity in the lithium battery industry and strong pressure from downstream customers to reduce costs. However, product prices continued to decline. However, product prices continued to decline. The company's sales only increased slightly year on year, but profits declined. According to Baichuan Yingfu data, the average price of 24H1 electrolyte was 0.0211 million yuan/ton, a year-on-year decrease of 47.7%. 24H1 achieved operating income of 2.293, 0.712, and 0.365 billion yuan respectively, with year-on-year changes of +4.44%, -4.72%, and +20.07%, respectively. The gross margins were 13.65%, 62.22%, and 40.48%, respectively. The year-on-year changes were -2.08, -10.17, and +2.14pct, respectively.

The company actively lays out battery chemical production capacity on a global scale. 24H1's battery chemical production capacity is 0.2479 million tons/year, capacity utilization rate 63.35%, and production capacity under construction is 0.3194 million tons. As of June '24, the company's battery chemicals have achieved delivery guarantees at 9 production sites worldwide, including 8 in China and 1 in Europe. The domestic Chongqing Xinzhoubang lithium battery materials project, the Jiangsu (Huai'an) additive project, the Nantong semiconductor new materials and battery chemicals project are under construction, the Huizhou Zhoubang Phase IV electronic chemicals project, and the US Xinzhoubang battery chemicals project are under construction. At the same time, the company has initially completed the industrial chain layout for solvents, additives, new lithium salts, and new additives with independent intellectual property rights.

The first phase of the Heidford project was gradually put into operation, and the range of organic fluorochemical products was gradually improved. According to the business strategy of “production generation+R&D generation+reserve generation”, the company continuously improves the types of organic fluorochemicals products, focusing on the application development of high-end fine chemicals and fluoropolymers. Demand for terminals in the 24H1 fluorine chemical industry is basically stable. The company moderately adjusted its product sales structure, and the first phase of the Heidford project was gradually put into operation. 24H1 has a production capacity of 0.0116 million tons/year for organic fluorine chemicals, a capacity utilization rate of 61.42%, and a production capacity of 2,200 tons under construction.

Capacitor chemicals and semiconductor chemicals businesses are growing steadily. In terms of capacitor chemicals, the company's current production capacity is 0.0192 million tons/year, capacity utilization rate 65.03%, 24H1 production and sales increase, and product gross margin is stable; in terms of semiconductor chemicals, the company's current production capacity is 0.0479 million tons/year, capacity utilization rate 44.88%, production capacity under construction 0.046 million tons. 24H1's semiconductor chemicals product sales for display panels and solar photovoltaic manufacturing have declined steadily and drastically. growth.

Profit forecasting, valuation and ratings: Considering that electrolyte prices are still low, we have lowered the company's 24-26 profit forecast. Net profit due to mother for 24-26 is estimated to be 10.15 (down 16.6%) /14.70 (9.8%) /20.19 billion yuan (down 7.8%), respectively. The company focuses on the new electronic chemicals and functional materials business. It is expected that additional production capacity will continue to expand, the development prospects are broad, and the company's “buy” rating will be maintained.

Risk warning: risk of capacity construction, falling product prices, risk of downstream demand falling short of expectations.