Key points of investment

Q2 Performance Market Expectations. The company's 24-year H1 revenue was 0.98 billion yuan, up 2.5% of the same period, net profit of 0.15 billion yuan, the same increase of 29.9%, the gross profit margin was 23.3%, the same increase of 0.9 pct, the net interest rate to the mother was 15%, and the same increase was 3.2 pct; of these, 24Q2 revenue was 0.52 billion yuan, +2.8%/+10.6% year on month, net profit of 0.07 billion yuan, gross profit margin of 24% compared to the same period last month, +1/+1.4pct The parent net interest rate was 13.6%, the same as the previous year, with a decline of 3 pct. The performance was in the median forecast, in line with market expectations.

Activated carbon Q2 is fully produced and sold, and the annual shipment is expected to be 0.135 million tons. In terms of activated carbon, the company's H1 revenue was 0.68 billion yuan, an increase of 14%, corresponding to shipments of 0.067-0.068 million tons, of which Q1 shipped 0.031-0.032 million tons, and Q2 shipped 0.036 million tons, starting full production and sales. The company expects to ship 0.135 million tons throughout the year, an increase of 5% +, including 0.12 million tons of powdered carbon and 0.015 million tons of granular carbon, an increase of 50%; silicides On the other hand, the company's H1 revenue was 0.3 billion yuan, a decrease of 16%, including sodium silicate revenue of 0.23 billion yuan, a decrease of 19%, and silicone revenue of 0.07 billion yuan, an increase of 1%. The sodium silicate business volume declined, mainly due to the divestment of Evonik Jialin's production capacity, which fell from 0.3 million tons to 0.16 million tons, but extended from water glass to white carbon black products. We expect to start contributing revenue in '25.

The gross margin of activated carbon decreased slightly, silicide extended downstream, and gross margin gradually increased. In terms of activated carbon, the company's H1 gross profit margin was 25.1% in 24, down 2.6 pct, mainly due to the expansion of the low-end market. With high gross margin granular carbon emissions, we expect the gross margin to return to 27% in 24; in terms of silicides, the company's gross profit margin of H1 sodium silicate was 15.3% in 24, an increase of 5.9pct. Sodium silicate extended downstream, and white carbon black began to contribute profits in '25. We expect the gross margin to exceed 30%. The gross profit margin of H1 silicone in 24 years was 32.4%, an increase of 1.0 pct, and returned to normal levels. Furthermore, with the launch of silicon-carbon products in 25 years, the barriers are even higher, and we expect the profit level to be superior to the main business.

The expense ratio was basically stable, and cash flow was positive month-on-month. The company's expenses for the 24H1 period were 0.11 billion yuan, an increase of 13.6%, an expense ratio of 11.5%, and an increase of 1.1 pct, including 0.06 billion yuan for the 24Q2 period, +22.1%/+1.9%, and the cost ratio was 11.1%, +1.7/-0.9 pct; 24H1 net operating cash flow of 2.57 million yuan decreased by 95.6%, of which Q2 operating cash flow was 0.09 billion yuan, a decrease of 13.4% from the same period, and the same increase from month to month; 24H1 capital expenditure was 0.07 billion yuan, a decrease of 59.9%, of which Q2 capital expenditure was 0.03 billion yuan, -75.3%/-35.4% year over month; inventory at the end of 24Q2 was 0.26 billion yuan, down 4.8% from the end of Q1.

Profit forecast and investment rating: Considering the intensification of market competition, we revised the net profit to mother for 24-26 to 0.25/0.3/0.48 billion yuan (previously forecast net profit of 0.26/0.29/0.47 billion yuan for 24-26), +6%/+18%/+61% over the same period, corresponding PE was 19/16/10x, maintaining the “buy” rating.

Risk warning: Industry competition intensifies, new technology release falls short of expectations, downstream demand falls short of expectations.