The company released the 24H1 performance report. The company's 24H1 achieved net profit of 0.085 billion yuan, up 264.25% year on year; realized deducted non-net profit of 0.05 billion yuan, up 182.36% year on year; realized operating income of 3.454 billion yuan, up 0.16% year on year; realized total profit of 0.067 billion yuan, up 146.80% year on year; realized net profit of 0.042 billion yuan year on year, up 171.67% year on year, down 0.75% month on month; achieved Net profit after deducting non-return to mother was 0.013 billion yuan, up 118.83% year on year; realized operating income of 1.764 billion yuan, down 3.24% year on year and 4.40% month on month.

Steady expansion of production capacity to achieve integration of coating and pulp. Based on the basic board of specialty paper, the company implemented the company's strategic plan to “strengthen, improve and expand new coating materials and related industries”, and the integrated development pattern of the Zhanjiang Donghai Island industrial base was highlighted. The 0.3 million ton high-grade coated white card machine was successfully started, and trial production and commissioning were successful; the installation of the main equipment for the 0.06 million ton special paper project was basically completed; the Zhanjiang medium paper 0.4 million ton pulp project started bidding work, with an estimated total investment of about 1.755 billion yuan; the special fiber composite pilot test project has completed the signing of the main equipment contract. After the construction of our own pulp production line, it is expected to effectively smooth out the fluctuation of the pulp price cycle and achieve cost control and profit growth.

Focus on innovation and development, and technology empowers growth. The company's 24H1 R&D expenses were 0.195 billion yuan, up 2.69% year over year. It has been granted 29 patents, including 8 invention patents and 33 patents have been applied for; participated in and issued 12 national and industry technical standards; and 1 R&D achievement certification has reached the leading international level.

Corporate income tax for the year 24 is paid at 15%, which has certain tax advantages. The company invests in leading industries in R&D and launches new products such as digital printing films and medical film coatings in the field of specialty materials, which is expected to drive profit growth in the future.

Expense control is efficient, and profit improvement can be expected. The company's 24Q2 sales gross profit margin was 9.33%. The month-on-month slowdown in 24Q2 profit growth was mainly affected by cost pressure caused by wood pulp prices. Costs can be further reduced when the pulp price correction in the market is transmitted to the production side. The company's cost control was relatively efficient. The cost rate during the 24Q2 period was 9.3%, down 0.6 pct year on year. Among them, the sales/R&D/management/ finance expenses ratio was 0.8%/4.5%/3.2%/0.8%, respectively, up -0.32/-1.32/ +0.01% /+1.06 pct.

Investment advice: The company specializes in specialty paper, actively optimizes and upgrades the industrialization chain, and transforms to high-end and green transformation. The company actively lays out color printed materials, continuously extends the layout downstream of the industrial chain, innovates rapidly, has strong influence in the industry, and has sufficient momentum for long-term growth. We expect net profit due to mother for 2024-2026 to be 0.183 billion yuan, 0.3 billion yuan, and 384 million yuan, respectively, +497%, +63%, and +28%, respectively. The corresponding PE is 24.5x, 15.0x, and 11.7x, respectively.

Risk warning: economic recovery is not as good as expected, raw material prices fluctuate, market competition intensifies