Incident: The company announced its 2024 three-quarter report. The first three quarters achieved revenue, net profit to mother, and net profit without return to mother were 1.892, 0.596, and 0.578 billion, respectively, +19.99%, +15.10%, and +15.43%, respectively. In 2024Q3, it achieved revenue, net profit to mother, and 5.97, 1.92, and 185 million, respectively, compared with the previous quarter, +4.92%, +11.71% and +13.41%, respectively. 18.45%

The “basic warehouse” business is developing steadily, and the growth trend continues. In recent years, the share of adsorption and separation materials in the company's revenue has continued to rise, and the “basic warehouse” business has developed steadily, helping the company grow sustainably. In the first three quarters of 2024, the company's revenue for adsorption and separation materials was 1.46 billion yuan, accounting for 77.19%; system equipment revenue was 0.366 billion yuan, accounting for 19.36%. According to the 2023 annual report, the company's revenue from adsorption and separation materials in 2023 was 62.54%, gross margin was 51.13%, system equipment revenue accounted for 33.14%, and gross profit margin was 44.92%. Therefore, the increase in the proportion of high-margin adsorption material products represented by life sciences, metals, etc., is driving the company's gross margin to continue to improve. The comprehensive gross margins of 2024Q1, Q2, and Q3 companies were 45.42%, 49.44%, and 51.20%, respectively. At the same time, the company's balance ratio at the end of the third quarter was 35.40%, down 3.91 percentage points from the end of '23, and the company's financial situation was stable.

Focus on core competencies to increase market penetration and move firmly towards internationalization. The company is a leader in the domestic adsorption and separation resin industry, and there are future highlights in many fields: 1) As a core supplier of polypeptide solid phase synthesis carriers, it will continue to benefit from the boom in the downstream GLP-1 market. 2) Salt Lake Brine's direct lithium extraction technology leader, highlights the advantages of the company's low overall cost and high degree of industrialization maturity in the context of declining lithium prices. According to the announcement on May 22, 2024, the company's existing orders for salt lake lithium extraction had not confirmed that the revenue contract amount was greater than 1.1 billion yuan. 3) Application expansion of homogenized resin in the field of ultrapure water. In the first three quarters of 2024, the company completed testing or online operation of electronic grade homogenized resin in chip manufacturers such as storage, and the performance indicators fully met chip-level requirements; participated in and promoted resin share replacement of existing systems and newly built production lines of domestic panel companies. Currently, it has reached resin replacements/intentions with photovoltaic, panel, and semiconductor chip companies, and will continue to accelerate the certification of homogenized resin in the field of ultrapure water in the future to achieve a steady increase in order volume. 4) Contributing to potential incremental markets in the fields of environmental protection and basic chemicals.

At the same time, the company upholds the high-end positioning of the industrial chain to export high-quality products and new technologies, and actively implements the internationalization strategy. In recent years, the penetration rate of the company's products in overseas markets has gradually increased. The coverage has been expanded to include North America, Europe, Asia, South America, Africa, etc., and a global network has gradually formed. Overseas business revenue of 0.49 billion yuan was achieved in the first three quarters, an increase of 48% over the previous year. After more than 20 years of growth, the company has become a domestic leader in the adsorption and separation materials and technology industry, and is expected to become a leading international enterprise in the future.

Profit forecast and investment advice: Considering that the company's system equipment sector was affected by the pace of revenue confirmation for major projects in the first three quarters, we lowered our profit forecast. The company's 2024-2026 net profit is expected to be 0.825/1.058/1.312 billion (1.009/1.314/1.64 billion before 2026, respectively), and the 2024-2026 PE corresponding to the current stock price is 30.3/23.6/19.0X, respectively, considering the company's use as an adsorption and separation material and It is a domestic leader in the technology field, with broad downstream application scenarios, and the international strategy progresses smoothly. We maintain a “buy” rating.

Risk warning: Risk of market development falling short of expectations; risk of large fluctuations in lithium prices; risk of large fluctuation in raw material prices; risk of diet medicine market expansion falling short of expectations; risk of falling overseas demand; risk of lagging reference information; policy risk.