The company released its three-quarter report for 2024. In the first three quarters of 2024, the company achieved revenue of 1.892 billion yuan, a year-on-year increase of 19.99%; net profit to mother was 0.596 billion yuan, an increase of 15.10% over the previous year. Among them, 24Q3 achieved revenue of 0.597 billion yuan, up 4.92% year on year, down 10.00% month on month; realized net profit to mother of 0.192 billion yuan, up 11.71% year on year, down 18.13% month on month. I am optimistic about the steady growth of the company's adsorbent materials business and maintain the purchase rating.

Key points to support ratings

The company's performance grew steadily in the first three quarters of 2024, and the 24Q3 performance declined month-on-month. The company's performance increased year-on-year in the first three quarters of 2024. The main reason was that adsorption materials were the core growth engine of the company's business, showing good resilience, and maintaining a high level of gross margin. The company's gross margin for the first three quarters of 2024 was 48.65% (+0.20 pct year on year), the net margin was 31.84% (year on year -1.21 pct), and the cost ratio for the period was 12.74% (+0.89 pct year on year), of which the financial expenses ratio was 0.76% (+2.34pct year on year), mainly due to a decrease in exchange earnings during the reporting period. 24Q3 The company's performance declined month-on-month, mainly due to the decline in revenue from the system equipment business. The 24Q3 company's gross margin was 51.20% (YoY +1.77 pct, month-on-month +1.76 pct) and net margin was 32.26% (YoY +1.93 pct, -3.69 pct month-on-month).

The share of adsorption and separation materials in total revenue continues to rise, and the “basic warehouse” business is developing steadily. According to the investor relations activity record table, in the first three quarters of 2024, the company's revenue from 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%. In recent years, the proportion of the company's adsorption and separation materials in revenue has continued to increase, and the “basic warehouse” business has developed steadily, and has good customer stickiness and business resilience. The company's product structure has been further optimized, and the growth rate of high-margin products represented by life sciences, metals, etc. is obvious, driving the gross margin of adsorption and separation materials to increase. In the life science sector, according to the interim report, the company's clinical phase 2 and 3 projects are progressing steadily, and cooperative development relationships have been established with many well-known domestic pharmaceutical companies, and the commercial supply of hard gel ion exchange products has been completed; a new generation of higher capacity and higher alkali resistant protein A products has completed production amplification verification and performance tests; the company's solid phase synthesis carrier business sales trend is good, and it has become an important supplier in the field of peptides. In the water treatment sector, according to the investor relations activity record table, in the first three quarters of 2024, the company completed the testing or launch operation of electronic grade homogenized resin in chip manufacturers such as storage, etc., and the performance indicators fully met the strict requirements of chip-level manufacturing; the panel business continued to increase, participating in and promoting resin share replacement in existing systems and new production lines in domestic panel companies, and further increasing the market share; at present, the company has reached resin replacement intentions with photovoltaic, panel, and semiconductor chip companies. In the future, it will continue to accelerate the certification of homogenized resin in the field of ultrapure water to achieve a steady increase in order volume.

The Salt Lake lithium extraction project continues to advance, and overseas business is growing rapidly. According to the interim report, as of June 2024, the company has completed and implemented more than 15 industrial lithium extraction projects in salt lake, with a total production capacity of nearly 0.1 million tons of lithium carbonate/lithium hydroxide, 6 of which have been successfully put into operation. Since 2024, the company has continued to strengthen the promotion of salt lake lithium extraction technology in the international market. The R&D center in Argentina and South America has played a “strategic fulcrum”; in the domestic market, the adsorption materials and system equipment for the SDIC Potassium Project were successfully delivered in 24Q1, and the first production line of the Guoneng Mining Final Tea Card Project, a key project of the year, is being commissioned and tested. According to the investor relations activity record table, the company achieved overseas business revenue of 0.49 billion yuan in the first three quarters of 2024, an increase of 48% over the previous year. Internationalization is an important sustainable competitive advantage of the company. The company competes internationally in the high-end market with innovation-driven concepts, high-quality product positioning, and a reliable and stable supply cycle to prepare for a continuous increase in international penetration.

valuations

The company's “basic warehouse” adsorption materials business contributed well. Considering the decline in system equipment revenue and adjusted profit forecasts, the company's net profit to mother is estimated to be 0.836/1.019/1.249 billion yuan respectively in 2024-2026, corresponding to PE 32.9/27.0/22.0 times, respectively.

I am optimistic about the steady growth of the company's adsorbent materials business and maintain the purchase rating.

The main risks faced by ratings

The commissioning of the project fell short of expectations; demand for adsorbent materials fell short of expectations; the competitive landscape of the industry deteriorated.