Event: The company publishes its 2024 semi-annual report. 24H1 achieved operating income of 3.167 billion yuan, a year-on-year increase of 18.50%; realized net profit to mother of 0.171 billion yuan, a year-on-year decrease of 11.84%. Among them, 24Q2 achieved operating income of 1.582 billion yuan, a year-on-year increase of 19.85% and a decrease of 0.20% month-on-month; realized net profit of 0.089 billion yuan, an increase of 26.34% year-on-year and 7.69% month-on-month.

Implementing a volume-based pricing strategy, 24H1 revenue increased year-on-year, and 24Q2 profit improved month-on-month. Over the past 24 years, the agrochemical market has been sluggish and market demand has weakened. The company has made up prices with volume, and the revenue of major products has increased. In terms of pesticides, the company's herbicides and insecticides achieved revenue of 1.415 and 0.375 billion yuan respectively, with year-on-year changes of +5.36% and +23.77%, respectively, achieving sales volumes of 0.0454 and 0.0136 million tons, respectively, and +33.78% and +23.97% year-on-year respectively. Sales prices were 0.0312 and 0.0275 million yuan/ton, respectively, down 21.24% and 0.16% year-on-year respectively. The company's chlor-alkali products achieved revenue of 0.238 billion yuan, +1.23% year over year, achieved sales volume of 0.2657 million tons, +3.27% year over year, and sales price was 0.0009 million yuan/ton, -1.98% year over year. The company's flame retardant (phosphorous) products achieved revenue of 0.369 billion yuan, +124.58% year over year, achieved sales volume of 0.0443 million tons, +132.97% year over year, and sales price of 0.0083 million yuan/ton, -3.60% year over year. In terms of gross margin, 24H1's gross sales margin was 14.68%, a year-on-year decrease of 0.90pct. In terms of cost ratios, 24H1's sales, management, R&D, and finance expense ratios were 1.73%, 4.15%, 3.21%, and -0.84%, respectively, with year-on-year changes of +0.43, -0.32, +0.62, and -0.50pct, respectively.

Make every effort to speed up project construction and add strong momentum for development. As of July '24, the current production capacity of the company's pesticide sector includes 0.07 million tons/year of glyphosate (of which 0.03 million tons/year for the glycine method and 0.04 million tons/year for the IDAN method), 0.015 million tons/year, trichlorfon 0.005 million tons/year, amide series products 0.046 million tons/year, (refined) isopropylalachlor 0.002 million tons/year, diazinephosphorus 0.005 Million tons/year; current production capacity in the new materials sector includes flame retardants (TCPP) 0.08 million tons/year (including phase II 0.05 million tons/year), flame retardants (BDP) 0.015 million tons/year; in addition, 0.16 million tons/year of caustic soda and 4.4842 million tons/year of thermoelectric steam. In terms of construction capacity, the Zhijiang JS-T205 project has now entered the full installation stage, and the number of customers with market intentions will exceed 7,000; 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 scheduled within 24 years; civil construction and equipment procurement for the Guizhou phosphorus chemical resource comprehensive utilization project and the refined isopropyl metachlor (Jindur) project are progressing according to plan.

Profit forecast, valuation and rating: Considering that pesticide raw drug prices will continue to be low and the company's profit will continue to be under pressure, we lowered the company's profit forecast for 24-26. The company's net profit to mother for 24-26 is estimated to be 2.73 (22.5% reduction) /3.42 (33.5% reduction) /4.02 (35.6% reduction) billion yuan, respectively. With the gradual elimination of global pesticide stocks, demand for pesticide raw materials is expected to gradually improve, and the company's profitability will gradually recover. At the same time, the company actively lays out new profit growth points such as flame retardants, and is expected to continue to gain strength and maintain the company's “gain” rating.

Risk warning: There is a risk that production capacity implementation progress falls short of expectations, raw material prices fluctuate, and downstream demand falls short of expectations.