[Core Conclusion] The company focuses on the fields of big chemicals and health, adheres to the integrated upstream and downstream layout, continuously expands downstream applications, and continues to develop products in the direction of high added value. We are optimistic about the company's long-term growth. We forecast that the company's revenue for 24-26 will be 208 billion yuan, 237 billion yuan, and 26.3 billion yuan, respectively, and net profit to mother of 502, 6.35, and 749 million yuan, respectively. Referring to comparable company valuations, the 25-year PE valuation was given, corresponding to the 25-year target price of 25.76 yuan, covered for the first time, and given a “buy” rating.

The platform's large-scale advantage was unleashed, and 24H1 net profit bottomed out and rebounded. The company relied on the original plastic modification business to expand vertically to the upstream of the industrial chain, and also controlled the listed company Dongbao Biotech to build an integrated two-wing platform enterprise. 2024H1 gradually unleashed the advantages of large-scale platforms, and its revenue scale bucked the trend and achieved revenue of 9.327 billion yuan, an increase of 17.58% over the previous year. Among them, the revenue of organic polymer modified materials/composites/green petrochemicals and new materials increased 13.05%/24.29%/39.70% year on year, respectively. Net profit to mother bottomed out and rebounded, and 24H1 achieved net profit to mother of 0.275 billion yuan, an increase of 9.59% over the previous year.

Big chemical industry: The company's customer resources are high quality, and production capacity is gradually increasing. The concentration of the modified plastics sector is low. CR5 in '23 was only 14.13%, and companies are deeply tied to downstream customers, so customer resources are critical. The company serves high-quality customers such as Hisense, Gree, TCL, Huawei, BOE, and Ningde Times. The five major customers maintained more than 40% of revenue from 17-22, and built a strong corporate chassis. This ratio only declined after 23 years of green petrochemical business expansion, contributing 4.5 billion yuan in revenue in 23 years. The company's current production capacity of organic polymer modified materials, organic polymer composites, green petrochemical materials and new materials is 1.08/0.4/0.9 million tons, respectively, and the production capacity under construction is 0.3/0.1/1.02 million tons, respectively, to help the company grow in the long term.

Big health industry: The prospects are broad, and the company has a comprehensive layout in the fields of “medicine, health, food and beauty”. Dongbao Biotech, a subsidiary in the health sector, has an annual production capacity of 13,500 tons of gelatin and an annual production capacity of 39 billion hollow capsules, leading the industry in scale. Dongbao Biotech currently holds 60% of Yiqing Biotech's shares and plans to increase its holdings to 100%. Yiqing Biotech's market share in the domestic hollow capsule industry will be 6% in '21. After the “New Intelligent Industrialization and Production Expansion Projects” are put into operation, the annual production of hollow capsules is nearly 70 billion, and the market share is expected to increase.

Risk warning: Production capacity falls short of expectations, fluctuations in raw materials, increased market competition, etc.