Description of the event

The company released its 2024 mid-year report. In the first half of the year, it achieved revenue of 2.82 billion yuan (+12.5% YoY), achieved net vested profit of 0.22 billion yuan (+20.5% YoY), and realized 0.21 billion yuan of attributed deducted non-net profit (+20.4% YoY). Among them, Q2 achieved revenue of 1.47 billion yuan in a single quarter (+11.1% YoY, +8.2% month-on-month), attributable net profit of 0.11 billion yuan (YoY +13.3%, +5.5% month-on-month), deducting 0.11 billion yuan of unvested net profit (+17.8% YoY, +14.5% month-on-month), and Q2 quarterly results increased month-on-month.

Incident comments

The revenue side grew, gross margin increased, and the expense ratio increased slightly during the period. The company's revenue increased 12.5% year-on-year in the first half of the year, mainly due to increased revenue due to increased sales of the company's products such as antioxidants, light stabilizers, and U-pack. The company's gross margin for the first half of the year was 21.4% (+2.1 pct year over year). Considering the pricing model for the company's products, such as anti-aging additives and lubricant additives, the increase in gross margin may be due to an increase in product prices due to an improvement in the 2024H1 supply and demand pattern, as well as structural adjustments of some products. The company's expense ratio for the first half of the year was 11.9% (+1.3 pct year over year). Among them, sales, management, finance and R&D expenses changed +0.1, +0.5, +0.3 pct year on year, respectively, and R&D investment continued to increase.

The revenue and sales volume of the company's various series products increased year-on-year. By product, antioxidant revenue for the first half of the year was 0.87 billion yuan (+13.8%), gross profit margin 19.8% (+3.7 pct); light stabilizer revenue for the first half of the year was 1.02 billion yuan (+10.6%), gross profit margin 34.2% (+3.8 pct); U-pack's revenue for the first half of the year was 0.29 billion yuan (+5.0% year over year), gross profit margin 8.6% (+2.2 pct year over year). Looking at the second curve, the company's lubricant additive revenue in the first half of the year reached 0.52 billion yuan (+26.4% year over year), with a gross profit margin of 8.0% (-6.6 pct year over year). The increase in revenue for some of the company's products in the first half of the year was mainly due to increased product sales. With the further improvement in demand in the second half of the year, the company's production capacity utilization rate for anti-aging additives and lubricant additives continued to increase, and the company's revenue and profit are expected to continue to improve.

Endogenous epitaxial has expanded rapidly to create a platform-based fine chemical leader. First curve: The company has six production bases for anti-aging agents, covering North China, East China, South China, Northwest China, etc., which has consolidated the guarantee and supply capacity for single-product dual-base production. In terms of production capacity, production capacity for various products at the Zhuhai base phase I, Chifeng base phase I, Hengshui base, and Hangu base has continued to expand to ensure steady growth in the scale of the main business. Second curve: The main business of the company's subsidiary Jinzhou Kangtai is increasing the lubricant additive business. Jinzhou Kangtai pioneered the “additive supermarket” business model in the industry, with a wide range of products and a large number of products. By the end of 2023, the design production capacity of Jinzhou Kangtai lubricant additives (without intermediates) was 0.133 million tons. As the second phase of the project continues to be put into operation, production and sales are expected to continue to grow. Third curve: The company's life science division involves the two industries of biological blocks and synthetic biology, and has strong growth potential. Emerging business: Domestic high-end electronic grade polyimide materials are still in the process of breaking through. Based on this, the company indirectly acquired IPITECH INC, a Korean company in the PI materials field. It will also build R&D bases and production capacity in China to lay the foundation for the company's development into electronic high-end new materials.

Maintain a “buy” rating. The company is a leading domestic anti-aging additive, has mastered the core technology of antioxidants and light stabilizers, and continues to expand production capacity in its main business through endogenous and epitaxial layout of six major domestic production bases. Furthermore, in recent years, the company has entered the fields of lubricant additives, life science and electronic materials through mergers and acquisitions, internal integration, etc., to create a second and third life curve to ensure long-term growth. The company's estimated net profit for 2024-2026 is 4.7, 5.5 and 0.66 billion yuan, respectively.

Risk warning

1. Prices of bulk raw materials have skyrocketed;

2. Downstream demand falls short of expectations.