The company released its 2024 mid-year report

The first half of 2024 achieved operating income of 1.295 billion yuan, +28.50% year over year; realized net profit of 0.404 billion yuan, +16.79% year over year; realized net profit deducted from non-mother of 0.393 billion yuan, +16.41% year over year.

Among them, in the second quarter of 2024, the company achieved operating income of 0.664 billion yuan, +30.98% year over month; realized net profit of 0.235 billion yuan, +10.75% year on year, +38.90% month on month; realized net profit without return to mother of 0.227 billion yuan, +9.23% year on year and +37.48% month on month.

The basic business grew steadily, and the gross margin of the adsorbent materials business increased

Revenue: In the first half of 2024, Salt Lake lithium extraction system revenue was 0.099 billion yuan, +8% over the same period last year. After deducting the Salt Lake lithium extraction project, basic business revenue was 1.196 billion yuan, or +31%, accounting for 92.36% of total revenue in the first half of the year. The “basic warehouse” business maintained steady growth. Among them, revenue from adsorbent materials was 0.974 billion yuan, accounting for 82%; and revenue from system equipment was 0.19 billion yuan, accounting for 16%.

In the first half of 2024, the company achieved overseas sales revenue of 0.352 billion yuan, +56% year-on-year, and the product penetration rate in overseas markets gradually increased.

Gross profit: In the first half of 2024, the company's total gross profit was 0.615 billion yuan, +27.3% year-on-year. The company's comprehensive gross profit margin was 47.5%, -0.4 pct year over year. Among them, the gross margins of adsorption and separation materials and system devices were 51.03% and 35.85% respectively, +1.54pct and -9.28pct, respectively. The gross margin of the adsorption materials business increased further, mainly due to the increase in the share of high-margin businesses such as life sciences, metal resources, and ultrapure water.

The company's production and sales volume has increased dramatically. It plans to build 0.02 million tons of high-end material production capacity. In the first half of 2024, the company will produce 0.0316 million tons of adsorption materials, +27% over the same period; sales volume is 0.0308 million tons, +35% year over year. The company's industrial parks such as the 0.025 million ton special product line in Gaoling New Materials Industrial Park and the 0.015 million ton large application line in Pucheng New Materials Industrial Park have formed a scientific and reasonable production capacity layout. After review and approval by the company's shareholders' meeting, Pucheng Lanxiao, a wholly-owned subsidiary, plans to invest in the purchase of land use rights and plans to build 0.02 million tons of high-end material production capacity to meet the needs of high-end application market expansion, covering high-value-added adsorption and separation materials such as ultrapure water and food.

Salt Lake lithium extraction advantages continue, metal resources business continues to expand

In terms of lithium extraction in Salt Lake, as of the company's interim report, the company has completed and implemented more than 15 industrialization projects for lithium extraction in Salt Lake, with a total production capacity of nearly 0.1 million tons of lithium carbonate/lithium hydroxide, 6 of which have been successfully put into operation. The company's salt lake lithium extraction technology has obvious advantages in an environment where the price of lithium resources is relatively low, and the project has been put into operation to maintain a high production load. Domestically, the adsorption materials and system equipment for the SDIC Potassium Project have been successfully delivered, and the first production line of the Guoneng Mining Jiechaka Key Project is being commissioned and tested. Overseas, the company continues to strengthen the promotion of salt lake lithium extraction technology in the international market, cooperate deeply with strategic customers in South America, North America and other places, and establish a South American R&D center in Argentina.

In terms of metal resources, in the first half of 2024, the sales revenue of adsorption materials in the metal resources sector was 0.121 billion yuan, +45% over the same period last year. The company continues to expand its business around the field of new energy metals. Among them, it has signed a number of industrial projects in the fields of nickel extraction, cobalt extraction and recycling from laterite nickel ore, and extraction of vanadium from coal; gallium oxide mother liquid has always maintained a high market share, continues to replace foreign brands in the field of uranium extraction, and product sales have accelerated.

The life science sector continues to grow, and various sectors such as water treatment and chemicals are booming. In the first half of 2024, the company's life science sector's sales revenue of adsorption materials was 0.285 billion yuan, +33% over the same period last year, continuing the good growth trend. Benefiting from the good market performance of GLP-1 polypeptide drugs, the solid phase carrier business sales trend is good. With high-grade high-quality production capacity and continuous stable supply of solid phase synthesis carriers and resins, the company has become an important supplier in the field of peptides.

In the first half of 2024, the company's sales revenue for water treatment and ultra-purified adsorption materials was 0.323 billion yuan, +30% over the same period last year. Chemical and catalytic adsorption and separation materials achieved sales revenue of 0.097 billion yuan, +44% over the same period last year. Energy-saving and environmentally-friendly adsorption classification materials achieved sales revenue of 0.104 billion yuan, an increase of 18% over the previous year.

Investment advice:

We expect the company's revenue from 2024 to 2026 to be 2.967, 3.652, 4.64 billion yuan, and net profit of 0.922, 1.173, and 1.475 billion yuan, respectively, and the corresponding EPS is 1.83, 2.32, and 2.92 yuan/share, respectively. Currently, the corresponding PE price is 23.1, 18.1, and 14.4 times, maintaining a “buy-A” rating. The target price for 6 months is 74.4 yuan, which is equivalent to 41 times the dynamic price-earnings ratio in 2024.

Risk warning: demand falls short of expectations, raw material prices fluctuate greatly, and project progress falls short of expectations