The second-quarter results showed significant year-on-month growth. The company recently released its 2024 semi-annual report. In the first half of the year, it achieved operating income of 3.73 billion yuan, +26.1% year over year; net profit to mother of 0.2 billion yuan, -7.0% year on year. Looking at the second quarter, the company achieved operating income of 1.91 billion yuan (+29.4% YoY, +5.2% YoY) and realized net profit of 0.13 billion yuan (YoY +17.1%, +76.8%). The second and third quarter was the peak season for oil blending products, and the maintenance of upstream raw material suppliers in the second quarter of last year affected profits for the same period. The company's performance in the second quarter of this year achieved significant year-on-month growth.

Improved profitability of isooctane: Isooctane has been officially included in the scope of consumption tax since July of last year. Although the gross margin of its energy sector increased significantly year-on-year, actual profit per ton after tax deduction declined. However, judging from the price difference performance after tax deduction from the beginning of this year to now, isooctane profits are gradually being recovered, and the company's gross margin in the energy sector in the first half of this year also increased by about 5.3 pcts compared to the second half of last year. Moreover, the company sells most of its isooctane to CNOOC, with fixed price differences. Subsequent oil blending projects are expected to further improve profits.

Technological transformation and adjustment project construction, waiting for multiple projects to be implemented: During the reporting period, the company's butyl acetate plant quality improvement and capacity expansion project was successfully put into operation, contributing to profit growth. At the same time, due to oversupply in the BDO industry in the short term, the company made timely project adjustments, and the BDO unit and butanone unit were jointly transformed into an ethanol unit with an annual output of 0.1 million tons of butanone and 0.065 million tons of ethanol, further opening up the profit margin of the butanone project and once again reflecting the company's leading technical advantage in flexible product structure adjustment. In the future, the company's many projects are waiting to be implemented. In particular, a new maleic anhydride plant with a lower cost advantage will be put into operation next year. Its single butane consumption is expected to be further reduced, and the competitiveness of the company's maleic anhydride industry chain will also be further improved.

Market conditions are changing, and the company made flexible adjustments to some projects in a timely manner to obtain higher long-term returns. Therefore, we have appropriately adjusted the commissioning time and product prices of some new construction projects. We expect the company's net profit to be 0.436, 0.726, and 0.998 billion yuan (originally 0.695 and 0.889 billion yuan in 24-25), respectively, and EPS of 1.14, 1.89, and 2.60 yuan per share, respectively, giving comparable companies an average of 14 times PE after 24 years of adjustment, corresponding to the target price 15.96 yuan, maintaining the buy rating.

Risk warning: overcapacity for some new products; risk of fluctuations in raw material prices; changes in consumption tax policies; declining oil market sentiment; project construction progress falls short of expectations.