Report guide

The company released its 2024 mid-year report, achieving revenue of 1.158 billion yuan, a year-on-year decrease of 2.95%; net profit to mother of 0.102 billion yuan, a year-on-year decrease of 23.12%; net profit not attributable to mother of 0.093 billion yuan, a year-on-year decrease of 29.25%. Among them, 24Q2's single quarter revenue was 0.684 billion yuan, up 3.17% year on year and 44.14% month on month; net profit to mother was 0.062 billion yuan, down 20.33% year on year, up 53.47% month on month; net profit without return to mother was 0.054 billion yuan, down 30.53% year on year, up 42.37% month on month. The performance was in line with our previous expectations.

Key points of investment

Construction adhesives are steadily leading the way, and industrial adhesives continue to grow

The company's revenue and profit declined in the first half of the year, mainly due to the continued decline in raw materials and the decline in product sales prices. According to Baichuan Yingfu, the average price of 24H1 silicone 107 is 14,849 yuan/ton, down 9.8% year on year. In terms of construction glue, according to the National Bureau of Statistics, the total area of houses completed in China in the first half of the year was 265.19 million square meters, down 21.8% from the previous year. The company's construction glue sales remained flat during the same period, and the market share increased steadily, but prices declined. Revenue in the first half of the year was 0.7 billion yuan, down 9.77% year on year, and gross profit margin was 22.02%, down 3.06 pct year on year. In terms of industrial adhesives, the company continued to deepen the application of industrial adhesives in the fields of photovoltaic solar energy, power batteries, automobile manufacturing, electronics and electrical appliances. In the first half of the year, sales volume of industrial glue increased 29.00% year on year, revenue of 0.34 billion yuan increased 16.50% year on year, gross profit margin increased by 1.17 pct year on year. We expect the revenue share of high value-added products such as electronics and car glue to increase mainly by 35.49% and 45.30% year on year. 24Q2's gross sales margin was 22.54%, down 3.17 pct year on year and 0.21 pct month on month; net sales margin was 9.00%, down 2.66 pct year on year, up 0.54 pct month on month. 24Q2's net operating cash flow was 0.078 billion yuan, a year-on-year decrease of 58.82%, mainly due to a decrease in cash receipts in the current period. In 24Q2, the company's inventory turnover ratio was 2.65 and the accounts receivable turnover ratio was 2.19, all of which declined year-on-year.

Endogenous growth+epitaxial mergers and acquisitions, the company can be expected to grow in the future

The company currently has a silicone production capacity of 0.21 million tons/year, and 24Q2 is currently constructing 0.249 billion yuan, mainly 0.05 million tons/year silicon-carbon anode materials and special adhesives for lithium batteries and 8,500 tons of coupling agent projects. The 0.05 million tons/year lithium battery adhesive project has completed all infrastructure and is undergoing equipment installation and commissioning. Furthermore, in December 23, it was announced that it plans to invest 0.15 billion yuan to build an organic silicon advanced materials research and industrialization development project in Shanghai. In August '24, the company announced the progress of the acquisition of hot melt pressure-sensitive adhesive company Jiahao Co., Ltd., and the company's product layout will be further expanded after the acquisition is completed. The company's endogenous growth is progressing simultaneously with epitaxial mergers and acquisitions, and we are optimistic about the company's future development potential.

Profit forecasting and valuation

Prices of raw materials fell, and the price of the company's products was lowered to the forecast of 24-26 net profit to 0.301/0.406/0.482 billion yuan. The current price corresponding to PE was 13.19/9.79/8.24 times, respectively, maintaining the “buy” rating.

Risk warning

Production time falls short of expectations; fluctuation in raw material prices; accounts receivable risk; real estate policy risk, etc.