Incident: The company released its 2024 semi-annual report. 24H1 achieved revenue of 0.431 billion yuan, up 29.19% year on year, and net profit of 0.025 billion yuan, up 27.05% year on year; of these, 24Q2 achieved revenue of 0.239 billion yuan, up 25.28% year on year, up 24.52% month on month; net profit to mother 0.018 billion yuan, up 16.65% year on year and 163.33% month on month.

1. Demand in the global polylactic acid market is rising, and the company's sales and profit are growing steadily. According to customs data, from January to July 2024, China's import volume of polylactic acid in primary form was 0.0265 million tons, an increase of 52% over the same period last year; the export volume was 0.012 million tons, an increase of 153% over the same period last year. Specifically, when it comes to Haizheng Raw Materials, the company currently has more domestic market share than similar well-known companies in Europe and the US, ranking first in the country. According to the company announcement, 24H1 achieved a pure polylactic acid output of 0.0247 million tons, with a production and sales rate of 98.86%, corresponding sales volume of 0.0244 million tons; the company's polylactic acid resin sales increased by 48.22% over the same period last year, with an increase of 35% domestically and 140% overseas. The high increase in sales volume and the release of new production capacity led to a significant drop in production costs, enabling the company's profits to rise steadily in the general context of declining sales prices for polylactic acid products.

2. Following the plastic ban policy, the material's own performance advantage or has become a new momentum for industry development. Judging from the sales volume of the company's polylactic acid, among its demand segments: 1) The 3D printing consumables sector has been growing at a considerable rate in recent years. Among them, 24H1 increased 117% over the same period last year, mainly due to technological innovation in high-speed printing in the industry, strong demand in the consumables market, and the company's maintenance of normal growth in old customers, and the increase in newly expanded key customers; 2) The extrusion sector, which increased 114% over the same period last year, mainly due to the increase in domestic and foreign market demand, especially in transparent markets such as the US and Europe blister Demand has increased markedly; 3) The disposable knife and fork sector increased by 54% over the same period last year. Thanks to the company's overall demand at home and abroad, it has gradually increased the procurement share of major old customers through continuous optimization of material performance and other advantages.

According to the company division, in addition to the 3D printing and fiber market, other application markets can currently be regarded as policy markets. It is worth noting that the 3D printing consumables market, the polylactic acid fiber and powder market used in shale gas extraction, etc. are markets formed due to the properties of polylactic acid itself. Judging from the growth rate in different fields of the company's polylactic acid product structure, we believe that the new market demand generated by the performance advantages of polylactic acid materials may have become a new impetus for industry development. As research on materials continues to deepen, demand increases and profitability may have more room for imagination.

3. Profit forecast & investment advice: Due to the continuous decline in polylactic acid prices, we lowered the 24-25 year profit forecast and updated the 26-year profit forecast: in 2024-2026, the company achieved revenue of 9.16/1.136/1.619 billion yuan (previous value of 1.306/2.22 billion yuan), net profit to mother of 52/0.068/0.102 billion yuan (previous value of 24-25 was 0.123/0.228 billion yuan), corresponding to EPS 0.26/ 0.34/ 0.50 yuan/share, downgraded to “hold”.

Risk warning: risk of price changes for major products; downstream demand falling short of expectations; macro-environmental risks; fund-raising projects falling short of expectations.