The company released its 2024 mid-year report. Revenue for the first half of 2024 was 3.167 billion yuan, up 18.50% year on year; net profit to mother was 0.171 billion yuan, down 11.84% year on year; net profit after deducting non-return to mother was 0.16 billion yuan, down 18.76% year on year. Among them, Q2 revenue was 1.582 billion yuan, up 19.85% year on year; net profit to mother was 0.089 billion yuan, up 26.34% year on year; net profit after deducting non-return to mother was 0.08 billion yuan, up 4.23% year on year.

The volume and price of major products are stabilizing, and performance is expected to continue to improve. In the first half of 2024, the overall demand for downstream products in the global agrochemical market was weak. Prices of major agrochemical products continued to operate at a low level, and sales of the company's main products rebounded year-on-year. According to the company announcement, the company's sales volume of herbicides, insecticides, chlor-alkali, and flame retardants improved in Q2 in 2024, to 20585, 6934, 134250, and 23539 tons, respectively, +24.66%, +28.94%, +2.80%, and +144.33% year-on-month, respectively, -16.93%, +3.28%, +2.14%, and +13.21%. In addition, prices continued to be low and increased month-on-month. In the first half of 2024, the average prices of herbicides, insecticides, chlor-alkali, and flame retardants were 31,187 yuan/ton, 27,489 yuan/ton, 896 yuan/ton, and 8,328 yuan/ton, respectively. The year-on-year period was -21.24%, -0.16%, -1.98%, and -8.25%, respectively. As inventory removal comes to an end, we believe that the pesticide industry is bottoming out and product prices are expected to rise, driving the company's performance to continue to pick up.

Promote the construction of production bases and accelerate the implementation of multiple projects. The Zhijiang JS-T205 project has entered the full installation stage. It is planned to launch trial production by the end of the year. The market has more than 7,000 cooperative customers, striving to achieve the goal of “when launched; the first phase of the intelligent formulation project has entered the trial production stage; the first phase of the heating center project has completed the evaluation of the linked operation plan and is expected to be put into operation as planned within the year; and the procurement of civil construction and construction equipment for the Guizhou Phosphorus Chemical Resource Comprehensive Utilization Project and the Refined Promethoxamine (Jindur) project is progressing in an orderly manner. With the gradual implementation of the project, it is expected to inject strong new momentum into the company's development.

Adjust profit forecasts to maintain a “buy” rating. Currently, the pesticide boom has recovered, and at the same time, the company issued a special incentive plan to guarantee the implementation of the project. We expect to achieve revenue of 7.1/9.06/10.43 billion yuan in 2024-26 (previously 7.14/9.12/10.53 billion yuan), net profit of 0.36/0.72/1.01 billion yuan (previously 0.48/0.87/1.15 billion yuan), corresponding PE of 15X/7X/5X, maintaining a “buy” rating.

Risk warning: pesticide prices are declining, project progress falls short of expectations, profit forecasts fall short of expectations