Key investment points: The company released its 2024 semi-annual report. In the first half of the year, the company achieved operating income of 0.377 billion yuan, a year-on-year decrease of 24.37%; realized net profit attributable to shareholders of listed companies was 0.046 billion yuan, a year-on-year decrease of 38.14%, and realized net profit after deduction of 0.042 billion yuan, a year-on-year decrease of 41.69%. Basic earnings per share were $0.46.

The revenue structure was adjusted, and results declined in the first half of the year. The company is a leading enterprise in the adsorption molecular sieve industry in China. It is mainly engaged in R&D, production, sales and technical service of products related to molecular sieve adsorbents in inorganic non-metallic porous crystal materials. The products include molecular sieve raw powder, molecular sieve activated powder, molded molecular sieve and activated alumina. The downstream includes gas separation, adsorption drying, life and health, energy and chemical industries. Since 2024, due to market changes, the company's products and customer structure have changed significantly. Due to the decline in demand for oxygen concentrators, the company's revenue in the life and health sector has declined quite a bit. Revenue of 70.16 million yuan was achieved in the first half of 2024, accounting for 18.62% of revenue, down 12.04 percentage points from 30.66% in 2023. Furthermore, due to the downturn in the smelting sector such as steel, etc., it had a certain impact on the company's demand for variable pressure adsorption molecular sieves, leading to a decline in gas separation business revenue. Affected by this, the company achieved revenue of 0.377 billion yuan in the first half of the year, a year-on-year decrease of 24.37%.

In terms of profitability, in the first half of 2024, the company's consolidated gross margin was 30.21%, down 1.02 percentage points from the previous year, and remained stable overall. The cost rate for the period was 16.72%, an increase of 3.11 percentage points over the previous year. Among them, the management expense ratio was 9.90%, an increase of 2.32 percentage points over the previous year. Affected by the decline in profitability, the company achieved net profit of 0.046 billion yuan in the first half of the year, a year-on-year decrease of 38.14%, and net profit after deduction of 41.69% year-on-year.

Demand for molecular sieves is expected to continue to grow under the trend of domestic substitution. The company's molecular sieves are mainly used in industrial fields such as gas separation, adsorption and drying, and are expected to grow in the future. The global molecular sieve industry pattern is polarized, and key technologies and high-end products are mainly concentrated in the hands of leading overseas companies. After years of technology research and development and continuous bottleneck breakthroughs, a few domestic enterprises are in the process of active import substitution. Jianlong's micro-nano technology is at the leading level in China, ranking first in the country and third in the world. It is expected to increase its market share in the future in the trend of import substitution of domestic products.

Overseas market development accelerated, and positive progress was achieved in the first half of the year. The company continues to advance its internationalization strategy and strengthens the development of international stock and incremental markets. In the first half of the year, export sales achieved a revenue of 0.0.5 billion yuan, an increase of 31.41% over the previous year. This reflects the positive results brought about by the continuous promotion of the company's internationalization strategy and deepening overseas layout, and also shows the competitiveness of the company's products in overseas markets. Driven by the internationalization strategy, the company has continuously strengthened cooperation with overseas customers, and its popularity and influence have continued to increase, laying a solid foundation for the company's long-term development.

Currently, demand for high-performance molecular sieves in developed markets such as North America and Europe continues to rise, and the industrialization process in emerging markets such as the Middle East, Southeast Asia, and Africa has also brought new opportunities, bringing opportunities to the company's internationalization strategy. In the first half of the year, Thailand's Jianlong achieved operating income of 38.8556 million yuan, a year-on-year decrease of 10.59%, and net profit of 7.4978 million yuan, an increase of 101.28% year-on-year. The compound growth rate of net profit for the past three and a half years reached 42.22%. Thailand's Jianlong Phase II project is expected to be put into operation by the end of the second half of 2024. At that time, it is expected to enhance the company's ability to accept orders for mature products and meet the needs of the global market.

Profit forecast and investment rating: The company's 2024 and 2025 EPS is expected to be 1.05 and 1.40 yuan, respectively. Based on the closing price of 19.74 yuan on September 11, PE is 18.73 times and 14.06 times, respectively. The company's valuation is reasonable. In line with the company's development prospects, it maintains the company's “increase in holdings” investment rating.

Risk warning: changes in overseas trade policies, rising raw material prices, intensifying industry competition