Incidents:

On October 25, 2024, China Catalyst released its 2024 three-quarter report: in the first three quarters of 2024, the company achieved operating income of 0.523 billion yuan, +43.57% year over year; realized net profit of 0.114 billion yuan, +162.63% year over year; realized net profit without deducted return of 0.108 billion yuan, +183.56% year on year; gross sales margin of 38.90%, up 0.51 pcts year on year, net sales margin 21.73%, up 9.85 year on year PCT; in the first three quarters of 2024, the company's net cash flow from operating activities was 0.094 billion yuan, an increase of 0.022 billion yuan over the previous year.

In the 2024Q3 single quarter, the company achieved operating income of 0.127 billion yuan, -0.08% YoY, -35.46%; realized net profit of 0.017 billion yuan, +324.34% YoY, -71.92% month-on-month; net profit after deduction of 0.016 billion yuan, +348.77% YoY, -72.01% month-on-month; gross sales margin was 36.49%, +4.95 pcts YoY and -5.27 pcts month-on-month; net sales margin was 13.55%, +10.36 pcts year on month, -17.6 pcts month on month; in the 2024Q3 single quarter, the company's net cash flow from operating activities was 0.057 billion yuan, +0.073 billion yuan year on year, -0.001 billion yuan month-on-month.

Investment highlights:

The company's product sales increased, and net profit for the first three quarters of 2024 increased year-on-year in the first three quarters of 2024. The company achieved operating income of 0.523 billion yuan, or +43.57% year-on-year, mainly due to the increase in sales volume. In the first three quarters of 2024, the company achieved net profit of 0.114 billion yuan, +162.63% over the same period, mainly due to an increase in operating income, a decrease in the cost ratio over the same period last year, and a decrease in share payment fees. In the first three quarters of 2024, the company's sales expenses were 7.2078 million yuan, +12.28%; management expenses were 37.6923 million yuan, -26.81%; financial expenses -7.3467 million yuan, a year-on-year decrease; and R&D expenses were 34.9488 million yuan, or -8.76% year-on-year. The net cash flow from the company's operating activities was 0.094 billion yuan, +31.61% year-on-year, mainly due to an increase in cash received by the company from sales of goods and provision of services.

In the 2024Q3 quarter, the company achieved operating income of 0.127 billion yuan, -0.08% year-on-year, and -35.46% month-on-month; realized net profit to mother was 0.017 billion yuan, +324.34%, or -71.92% month-on-month. In terms of period expenses, in a single quarter of 2024Q3, the company's sales expenses were 2.4584 million yuan, +7.20%, -13.93%; management expenses were 14.9007 million yuan, -17.00% YoY, +56.00% month-on-month; financial expenses 0.5606 million yuan, +504.21% YoY, +113.95% month-on-month; R&D expenses were 13.9176 million yuan, +15.74% YoY, +46.16% month-on-month.

Continuously improve R&D capabilities and promote product upgrades

The company's main products include special molecular sieves, non-molecular sieve catalysts and catalytic application processes and chemical technology services. In the environmental protection industry, the company's CHA structural mobile source denitrification molecular sieve process is mature, the quality is stable, and it has large-scale industrial production capacity, and has been supplying internationally renowned chemical companies such as BASF and Xixing for a long time; in the field of energy, chemical and fine chemicals, the company's propane oxide catalysts and pyridine synthesis catalysts have replaced imported products among some customers, and petroleum cracking molecular sieves have been supplied to BASF. The company's non-molecular sieve catalysts are mainly HDC catalysts, which are used to prepare glyphosate catalysts. In addition, the company has mastered the core process technology for various chemical products, including production process packages for HPPO propylene oxide, butanone oxime, methoxyacetone, etc. The company always insists on innovative research and development to enhance the core competitiveness of products. In the first three quarters of 2024, the company spent about 34.9488 million yuan on R&D. As of the first half of 2024, the company and its wholly-owned subsidiaries have obtained a total of 237 authorized patents. At the same time, the company actively lays out various environmentally friendly catalyst products such as TRH special molecular sieves, VOCs purification catalysts, and ethylene glycol synthesis catalysts.

The fund-raising project is progressing smoothly, and production capacity is gradually being released

The company has two projects under construction: a special molecular sieve, an environmentally friendly catalyst, an industrialization project for automobile exhaust purification catalysts, and a project for environmentally friendly new materials and intermediates. Among them, the project of 3,000 tons of special molecular sieves, environmentally friendly catalysts, and 1,000 tons of automobile exhaust purification catalysts has entered the commissioning and production stage, and production is expected to be completed in October 2024. On March 21, 2024, the company's new environmentally friendly materials and intermediates project completed the preliminary procedures required for project construction. The main products of the project include 3,300 tons of special molecular sieves and catalysts, 3,200 tons of non-molecular sieve catalysts, and 10,000 tons of fine chemicals. It is expected to be completed in February 2026. As the production capacity of the fund-raising project is implemented, the company's product matrix is further enriched, and the company's business is expected to grow at an accelerated pace.

Profit forecasts and investment ratings estimate that the company's 2024-2026 revenue will be 0.675, 0.844, and 1.059 billion yuan, respectively, and net profit to mother will be 0.135, 0.174, and 0.231 billion yuan, respectively, corresponding to PE 28.46, 22.07, and 16.60 times, respectively. As a leading domestic catalyst enterprise, the company's main business is stable. With the gradual release of production capacity in fund-raising projects, the company is expected to grow rapidly, achieve domestic substitution, and maintain a “buy” rating.

Risks suggest that market development falls short of expectations; risk of raw material price fluctuations; new product development falls short of expectations; industry competition pattern deteriorates; risk of falling product prices; domestic substitution process falls short of expectations; risk of exchange rate fluctuations.