Incident: The company released a performance forecast for the third quarter of 2024. It is expected to achieve net profit of 0.282-0.293 billion yuan in the first three quarters of 2024, up 20%-25% year on year, after deducting 0.277-0.287 billion yuan in non-return net profit, up 34%-39% year on year; of these, the third quarter is expected to achieve net profit of 0.091-0.102 billion yuan, up 7%-20% year on year, net profit of 0.093-0.103 billion yuan. The year-on-year increase was 12%-23%.

Sales of small products continued to grow, and performance improved steadily. In the first three quarters of 2024, the company continued to optimize its product structure, focusing on the small variety sector. The product volume continued to increase, and the efficiency grew steadily. It is expected to achieve net profit of 0.282-0.293 billion yuan in the first three quarters of 2024, an increase of 20-25% over the previous year. In terms of sales, the total sales volume for the first three quarters of 2024 is expected to reach 0.1301-0.1323 million tons, an increase of 0.0243-0.0265 million tons over the same period last year, and an increase of 23%-25% year-on-year. The surfactant industry has the characteristics of many varieties and low industry concentration. Among them, low-end products are fiercely competitive, and many high-end products still rely on imports. The company stopped producing and selling large products with relatively poor profitability from mid-2023, focusing on the small variety sector. As sales in the small variety sector continue to grow, the company's profit level is expected to continue to rise.

The variety of products is rich, and new sectors are cultivated to open up new application fields. The company has a wide range of products. At present, it has developed nearly 1,800 kinds of products. In the first half of 2024, 12 new nationally authorized invention patents were added, 1 new internationally authorized invention patent was added, and 6 new utility model patents were added. Two new national, industry, and group standards were added to the participatory system, for a total of 82. The company continues to cultivate new sectors. At present, it has formed 16 major sectors, and is continuously developing new products. Application sectors such as new functional materials, resins and high-end electronic chemicals are being cultivated at an accelerated stage. Its broad market prospects will guarantee the company's continued development.

The Kaimei passenger factory is progressing smoothly, opening up room for long-term growth. As of June 30, 2024, the company's technical improvement project with an annual output of 0.009 million tons of polyether amine is being installed and commissioned; the technical improvement project with an annual output of 200 tons of polyimide is being commissioned, and the products are mainly used in the aerospace field; Real Madrid's 0.33 million ton high-end functional new materials project (Phase I) has finished the main buildings in administrative districts and public areas, and internal and external decoration projects are in the construction phase. It is expected that with the successive commissioning of projects under construction, the company's profit is expected to reach another level.

Maintain a “Highly Recommended” investment rating. The company's revenue for 2024-2026 is estimated to be 2.39, 2.98, and 3.58 billion yuan, respectively, and net profit due to mother is 0.388, 0.479, and 0.568 billion yuan, respectively. The PE corresponding to the current stock price is 15.1, 12.3, and 10.3 times, respectively, maintaining a “highly recommended” rating.

Risk warning: the risk of increased market competition, safe production, and fluctuating raw material prices.