The company announced third-quarter results: Q3 revenue of 0.61 billion yuan, +20.5%/+6.2%, net profit to mother 0.1 billion yuan, +12.3%/-7.7% YoY. The first three quarters achieved revenue of 1.72 billion yuan, yoy +22.5%, net profit due to mother 0.29 billion yuan (not 0.28 billion yuan after deduction), and yoy +21.7% (after deducting yoy +36.2%).

The company's third-quarter results fell short of our forward-looking expectations (0.11 billion yuan), which we believe was mainly affected by pressure on polyether amine products. The company's projects under construction are about to be put into operation and are expected to contribute to incremental performance.

The number of products continued to increase, and the product structure was optimized. The performance for the first three quarters increased steadily year on year. During the reporting period, the company gradually released Real Madrid's production capacity, and production and sales increased steadily. In the first three quarters, the company achieved sales of 0.0.1313 million tons of surfactants, up 24% from last year's total caliber, and the average sales price was -1.4% YoY to 0.0131 million/ton. Among them, the strategic emerging sector sold 0.0346 million tons, with an average selling price of 0.0127 million yuan/ton. The company continued to optimize its product structure, focusing on the small variety sector, and the efficiency grew steadily. The company's gross margin was +1.0pct to 25.1% year on year in the first three quarters; the cost ratio declined steadily during the period, -1.3 pct to 6.0% year on year. With the promotion of the company's high-margin single products, it is expected that there is still room for improvement in performance.

Polyether amines are still under pressure, and net profit declined slightly month-on-month in the third quarter

The overall sales volume of surfactants in the 24Q3 single quarter was 0.0471 million tons, with an average sales price of -1.6% month-on-month to 0.013 million yuan/ton; of these, the strategic emerging sector sold 0.0125 million tons, +9% month-on-month, and the average sales price was -1.6% month-on-month to 0.0124 million/ton. There was no increase in profit in a single quarter. We think it was mainly due to pressure on the price of polyether amine, one of the company's products. According to Baichuan Yingfu, the average price of polyether amine D230 in the 24Q3 East China market was -7% month-on-month to 0.0129 million yuan/ton, and the price difference of polyether amine-epoxy-propylene glycol was -5% month-on-month to 0.0055 million/ton. The company's gross margin was -1.4pct to 24.8% month-on-month in 24Q3. Polyetheramine prices are expected to rise from the bottom as demand for downstream wind power grows.

The project under construction is about to be put into operation and is expected to contribute to incremental performance

According to the company's announcement, the company's technical improvement project with an annual output of 0.009 million tons of polyether amine is expected to achieve trial production in the third quarter of 2024, and is expected to contribute incremental results in Q4; the EIA for the 200-ton polyimide technical improvement project has been passed. The products are mainly used in the aerospace field and will be gradually put into operation in stages according to market conditions and project progress; Real Madrid Kaike has successfully started construction of the first phase of the high-end functional new materials project with an annual output of 0.33 million tons. It is expected that trial production will be achieved before the end of 2025. The successive commissioning of projects under construction is expected to further increase the company's profits.

Profit forecasting and valuation

We maintain our previous profit forecast. The company's net profit for 24-26 is estimated to be 0.417 billion yuan, 0.5 billion yuan, and 604 million yuan, with year-on-year growth rates of 28.4%, 20.1%, and 20.6%, respectively, and corresponding EPS of 0.71, 0.85, and 1.03 yuan. Combined with a comparable company's 25-year Wind average estimate of 18xPE, considering that the company has many traditional surfactant products but new projects are about to be put into operation, the company was given 14 times PE in 25 years, with a target price of 11.90 yuan, maintaining the “gain” rating.

Risk warning: There is a risk that downstream demand will continue to be sluggish, and the commissioning of new projects will not meet expectations.