Incident: The company released its 2024 three-quarter report. During the reporting period, the company achieved revenue of 2.189 billion yuan, a year-on-year increase of 15.01%, net profit of 0.18 billion yuan, a year-on-year decrease of 11.80%, after deducting 0.173 billion yuan in non-net profit, a year-on-year decrease of 10.99%. Among them, the company achieved revenue of 0.706 billion yuan in a single quarter, up 9.35% year-on-year and 4.45% month-on-month, and a net profit of 0.033 billion yuan. 50.23%, down 53.50% month-on-month.

Revenue from aliphatic amines and synthetic fragrances increased significantly, and the organic solvent business declined. In the first three quarters of 2024, the company achieved revenue of 1.06 billion yuan, up 16.8% year on year, sales volume 0.091 million tons, up 23.3% year on year, average sales price 0.0116 million yuan/ton, down 5.33% year on year; organic solvents achieved revenue of 0.331 billion yuan, down 5.6% year on year, sales volume 0.04 million tons, down 10.1% year on year. Average sales price was 0.0082 million yuan/ton, up 5.01 year on year %; Synthetic perfumes achieved revenue of 0.576 billion yuan, up 66.8% year on year, sales volume 0.017 million tons, down 68.9% year on year. Average sales price was 0.034 million yuan/ton, down 1.25% year on year. Demand for synthetic fragrances increased year-on-year, Ningxia's production capacity was gradually released, and synthetic fragrance revenue increased dramatically. Due to deep cooperation with the Swiss company Givaudan, a leader in the global fragrance and fragrance industry, the company prioritized procurement of products needed by Givaudan from the company, which guaranteed high capacity utilization and stable market demand.

Fatty amines and organic solvents were weak in the third quarter, and revenue from synthetic fragrances increased month-on-month. The company's comprehensive gross profit margin for the third quarter of 2024 was 18.9%, down 2.7 pct from month to month. Among them, sales volume, revenue and average price of fatty amines decreased by 8.0%, 13.1%, and 5.5%, respectively; organic solvent sales, revenue, and average price decreased by 14.2%, 22.6%, and 9.8%, respectively; and synthetic fragrance sales, revenue, and average price increased 13.9%, 7.0%, and -6.1%, respectively. Looking at the core product market, the average price of 2024Q3 isopropylamine, triethylamine, and isopropanol decreased by 12.0%, 7.5%, and 11.1%, respectively, compared to 2024Q2. The company's main products all have strong competitive advantages in China in terms of equipment size, process technology, production costs and market share.

Actively expand the scale of synthetic fragrance products, and there is plenty of room for growth in lithium extraction. As of June 2024, Ningxia Xinhua Company's 74,650 tons/year synthetic fragrance product base construction project has progressed 95%, and Ningxia Xinhua's phosphonine-containing new material product project is 50% in progress. Through years of development, the company's fragrance scale continued to expand. The overall demand for spices showed a positive trend in 2024, and the company's new production capacity was gradually released. Currently, Jiangsu Xinrui, a holding subsidiary of the company, has a production capacity of 16,000 tons/year for fragrance products. Subsequent, the first phase of the Ningxia Xinhua Synthetic Fragrance Products Base will gradually release its production capacity of 16,650 tons/year. Construction of the Jiangsu Xinrui Phase III expansion project of 18,000 tons/year has already started. In June 2024, the company announced that it plans to invest 60 million yuan to add 7155 tons/year product construction project at the synthetic fragrance product base of Ningxia Xinhua Chemical Co., Ltd. The company promotes the application of lithium extraction technology and specialty chemicals in salt lake lithium extraction, lithium ore extraction, and lithium battery recycling. It has been successfully applied to the Zangge Mining lithium precipitated mother liquor recovery device, Qinghai Salt Lake Lanke Lithium Co., Ltd. lithium mother liquor recovery, and Grimmie battery recycling production line.

Maintain an “overweight” investment rating. Due to the weak boom in the main products in the third quarter, we adjusted our profit forecast. The company's net profit for 2024-2026 is 0.256 billion, 0.352 billion yuan, and 0.442 billion yuan, respectively, and EPS is 1.38, 1.90, and 2.38 yuan respectively. The current stock price corresponds to PE of 17, 12, and 10 times, respectively, maintaining the “gain” rating.

Risk warning: Product prices are falling, raw material prices are rising, and the commissioning of new projects falls short of expectations.