Investment highlights

For the first time, Haohua Technology (600378) was covered to outperform the industry. The target price was 33.20 yuan. Based on the P/E valuation method, corresponding to the 2024/2025 valuation, the company is a scarce domestic new chemical materials production and research platform enterprise. The reasons are as follows:

Focus on the 3+1 core industry, and sector linkage reflects Haohua's value. The company has 13 scientific research enterprises. The main business layout: the fluorine chemical industry, which mainly focuses on high-end fluorine materials, the electronic chemical industry, which mainly focuses on electronic specialty gas, the high-end manufacturing chemical materials industry, which mainly supports materials for civil aviation, and the carbon emission reduction business that provides green and low-carbon overall solutions. We believe that as a research platform company, the technology of different subsidiaries has potential for migration and product support relationships. Understanding the synergy between the company's 3+1 business segments can help discover the company's investment value.

2Q24's performance increased significantly from month to month, and specialty sales reached an inflection point. In the first half of 2024, with the exception of special tires, the sales volume of the company's main products increased year-on-year, and the market share increased steadily. Among them, 2Q24 achieved net profit of 0.23 billion yuan to mother, -15% year-on-year and +70% month-on-month. In the various business segments of 2Q24, sales of specialty tires and special coatings were +113% and +68%, respectively, ending 2-3 consecutive quarters of decline in sales, indicating that the company's special product orders are recovering.

With the acquisition of Sinochem Blue Sky at a low price, refrigerant performance is highly flexible. Sinochem Blue Sky received R134a, R125, and R143a quotas of 5.96, 2.77, and 0.42 million tons respectively in 2024. In the company's profit forecast for this restructuring, the forecast price for R134a/R124/R410 is only 0.026/0.031/0.026 million yuan, which is quite conservative. We estimate that under the 2024 quota, for every increase in the R125 price of 0.01 million/ton, the profit elasticity is 0.277 billion yuan; for every increase in the price of R134a by 0.005 million yuan/ton, the profit elasticity is 0.298 billion yuan. Based on the average price for the 2Q24 quarter, Sinochem Blue Sky's annualized net profit is expected to exceed 0.89 billion yuan, corresponding to a P/E of only 8.1x, which is far lower than the current P/E value of 21x for 2024E of the listed fluorocarbon refrigerant company Sanmei Co., Ltd.

We are the biggest difference from the market: the market pays more attention to the performance elasticity of Sinochem Blue Sky, and we pay more attention to the collaboration and growth of the company's fluorine chemical sector after full layout.

Potential catalyst: The company's engineering services business performance grew rapidly, and the performance of fluorocarbon refrigerants was highly flexible after the acquisition of Sinochem Blue Sky.

Profit forecasting and valuation

We expect the company's 2024/25 EPS to be 1.37/1.61 yuan, respectively, and a CAGR of 40.9%. The current stock price corresponds to the 2024/25 price-earnings ratio of 20/17x. Sales of the company's products such as high-end fluorine materials, electronic specialty gas, and new polyurethane materials maintained a relatively rapid growth rate. At the same time, it acquired Sinochem Blue Sky, and the refrigerant supported performance growth. For the first time, it covered a “outperforming industry” rating. The target price was 33.2 yuan, corresponding to the 2024/2025 price-earnings ratio of 24/21x and 24.3%.

risks

Product prices continue to be sluggish, refrigerant prices fluctuate greatly, construction progress of new construction projects falls short of expectations, and the price of the raw material fluorite fluctuates.