Professional service provider for chemical engineering, “technology+engineering+industry” is mainly engaged in general engineering contracting and catalyst sales. In-hand orders are full. After the acquisition of Nuao Chemical in 2020, the company successfully expanded its business to chemical product sales. The driving performance continued to grow rapidly. At the same time, relying on technical advantages to lay out energy storage and rare earth rubber, the first-mover advantage is obvious: 1) Focusing on engineering design and general contracting for upstream and midstream hydrogen production and hydrogen storage and transportation, we expect the company to continue to benefit under market expansion;) Molten salt energy storage driven by policy The project progressed rapidly. We estimate that the investment scale of heat storage systems corresponding to the photothermal power generation projects announced in 23-24 reached 14.3 billion yuan; 3) master the rare earth rubber process and catalyst preparation production technology with an annual output of 50,000 tons, or fully benefit from the logical interpretation of domestic substitution; 4) fine chemical products have flexible switching production capacity, cooperate with Shanghai Huayi to lay out MMA, and continuous product structure optimization is expected to drive marginal improvement in profitability.

Relying on technological advantages to seize market share, the energy storage sector has achieved multiple growth in the field of hydrogen energy. The company has relied on existing technical reserves to continuously explore in the field of hydrogen energy, and has successively undertaken general contracting or design work for hydrogen energy projects such as Sinopec Qingdao Hydrogen Energy Resource Base and Ger Hydrogen Energy Technology Hydrogen Energy Utilization. According to relevant plans introduced by 26 provinces and cities, the national hydrogen energy production value is expected to exceed 80 billion yuan in 2025. The owners' willingness to advance hydrogen energy projects has increased markedly since 23 years. Supported by technological advantages, the company is expected to continue to gain market share. In terms of molten salt heat storage, we count that the new installed capacity of photothermal power generation projects that can be put into operation in 23-24 reached 3.3 GW, a significant increase from just 50 MW in '22. The investment scale for corresponding heat storage systems is expected to reach 14.3 billion yuan, with an average annual investment of 7 billion yuan. If we estimate that the National Energy Administration proposed to start construction of 3GW photothermal power plants in 145 years, the average annual investment in heat storage systems could reach 13 billion yuan.

The company undertook the general contract for the CGN Delingha 50MW photothermal project and has a first-mover advantage. In addition, the company also participated in the design of the Jintan Yankue compressed air energy storage project and continued to make efforts in the field of air energy storage.

Domestic substitution logic continues to be interpreted. In terms of the volume of rare earth butadiene rubber, it can be expected that the product performance of rare earth (neodymium) butadiene rubber is significantly superior to nickel, but domestic production capacity is less than 200,000 tons/year, and it still mainly depends on imports. Through external introduction, the company has mastered China's leading 50,000 tons/year rare earth rubber production process and catalyst preparation technology, and has the ability to build and design rare earth butadiene rubber production lines. It has carried out partial modifications to Sichuan Petrochemical's 150,000 tons/year nickel-based butadiene rubber plant to achieve a design capacity of 50,000 tons/year of neodymium butadiene rubber, and can switch normally with the original nickel production. It has now produced qualified products. According to our statistics, 350,000 tons/year of rare earth butadiene rubber production plants will be completed and put into operation during the 14th Five-Year Plan period. Considering that existing nickel-based rubber production capacity can also be modified, the potential market size is expected to be larger, thus creating the company's second growth curve.

Laying out new energy materials to support medium- to long-term development, and giving a “buy” rating, we think the company is expected to use technology and first-mover advantages to win more orders in the field of energy storage. At the same time, demand for new additions and modifications to the 14th five rare earth butadiene rubber production line is expected to increase, or drive continued high growth in performance. Net profit is estimated to be 4.3/54/70 million yuan in 23-25. According to the segmental valuation method and referring to comparable company valuations, we are optimistic about the profit elasticity of the subsequent company's business. We believe that the company's reasonable market value in 23 years was 6.7 billion yuan, corresponding to the target price of 10.33 yuan. It was covered for the first time, giving it a “buy” rating.

Risk warning: Raw material prices fluctuated beyond expectations, hydrogen energy market sentiment fell short of expectations, molten salt heat storage projects fell short of expectations, and market space estimates fell short of expectations.