Lianlong released its 2024 mid-year report: The company achieved operating income of 2.82 billion yuan, YoY +12.54%, net profit to mother 0.22 billion yuan, and YoY +20.51% in the first half of 2024.

From the revenue side, all core sectors achieved revenue growth. In the first half of 2024, the company's main polymer anti-aging additives business achieved growth. Antioxidant revenue increased 13.81% year on year to 0.869 billion yuan, light stabilizer revenue increased 10.62% year on year to 1.022 billion yuan, U-pack business revenue increased 4.95% year on year to 0.288 billion yuan; lubricant additives business also grew, and revenue increased 26.44% year on year to 0.521 billion yuan. On the profit side, the company's comprehensive gross margin increased 2.11 percentage points year-on-year to 21.41% in the first half of 2024, which led to an increase in the company's net profit.

Production capacity of main products continues to expand, cultivate diversified development curves, and expand growth space. ① The company's main business is polymer anti-aging additives, and has developed into a leading enterprise in the domestic anti-aging industry, forming a good competitive advantage in various fields such as management team, technology, product support, quality, customer service and marketing. Currently, the company has built six major production bases across the country, consolidating the guarantee and supply capacity for single product and dual base production.

By the end of 2023, the total production capacity of the company's anti-aging additives (including U-pack) reached 0.2154 million tons, and a 0.03 million ton antioxidant production expansion project is under construction at the Zhuhai base. After the Zhuhai project is put into operation, the company's scale effect is expected to increase, helping the company maintain its leading position in the industry. ② The lubricant additive business has begun to take shape. Jinzhou Kangtai, which was merged and acquired by the company, is in the first tier in China. By the end of 2023, the company's existing lubricant additive production capacity (excluding intermediates) had reached 0.133 million tons. The second phase of the new production capacity was put into operation in 2023. As the utilization rate of the company's new production capacity continues to increase, the company's business scale will further expand, creating a new growth point. ③ The life science business is in the development phase. The company is currently involved in 2 industrial directions, namely biological blocks and synthetic biology. ④ Acquired a Korean IPI company to lay out the field of high-end electronic grade PI materials. We believe that the company's main business and emerging business fields all have good prospects for development, and that the multi-sector business layout will help expand the company's growth space.

Company profit forecast and investment rating: As a leading domestic anti-aging additive company for polymer materials, we are optimistic that the company will use its advantages in innovation, products, technology, services, etc., to further expand and strengthen its main business, while actively expanding the lubricant additives business and life science business to drive future sustainable development.

We maintain our profit forecast for the company, that is, the net profit for 2024-2026 is 4.26, 5.10, and 619 million yuan, respectively, and the corresponding EPS is 1.86, 2.22, and 2.69 yuan, respectively. The P/E values corresponding to the current stock price are 13, 11, and 9 times, respectively. Maintain a “Highly Recommended” rating.

Risk warning: downstream demand falls short of expectations; raw material costs fluctuate greatly; project construction progress falls short of expectations; market competition intensifies.