Investment highlights: The company released its 2023 annual report. In 2023, the company achieved revenue of 972 million yuan, an increase of 13.87% over the previous year. Net profit attributable to shareholders of listed companies was 153 million yuan, down 22.65% year on year, and net profit after deduction was 137 million yuan, down 11.32% year on year, with basic earnings per share of 1.84 yuan. The company also released its 2024 quarterly report. In the first quarter, the company achieved operating income of 192 million yuan, a year-on-year decrease of 41.18%, and realized net profit attributable to shareholders of listed companies of 0.32 million yuan, a year-on-year decrease of 47.74%, and net profit after deduction of 0.28 million yuan, a year-on-year decrease of 52.09%, with basic earnings per share of 0.38 yuan.

Revenue continued to grow throughout the year, and performance declined slightly. The company is a leading enterprise in the adsorption molecular sieve industry in China. It is mainly engaged in R&D, production, sales and technical service of products related to molecular sieve adsorbents in inorganic non-metallic porous crystal materials. The products include molecular sieve raw powder, molecular sieve activated powder, molded molecular sieve and activated alumina, which are widely used in industrial gas separation, medical oxygen, energy chemicals, petrochemicals, environmental treatment and other fields. Since 2023, the company has stepped up research and development of iterative products, introduced more cost-effective upgraded products to customers in terms of mature products, and promoted a steady increase in sales and revenue of the company's core products. In terms of new product development, the company combines the performance advantages of molecular sieve products to develop more novel molecular sieve products that lead market consumption and solve customer product pain points, and have achieved breakthroughs in the application of new products in the automotive sector, home appliances and other industries. The company actively adjusted its marketing and sales strategy, actively increased market expansion efforts and R&D investment in new fields and products, increased response to customer needs in the first-tier market, and promoted continuous growth in revenue. The company achieved annual revenue of 972 million yuan, an increase of 13.87% over the previous year.

In 2023, the company promptly adjusted its marketing model according to changes in the competitive environment in the market and adopted a more active sales strategy to increase its market share. At the same time, the increase in the company's personnel expenses, marketing and R&D investment throughout the year caused sales, management and R&D expenses to increase by 22.46%, putting some pressure on the annual profit. The gross margin of the company's products is generally stable. Affected by the increase in expenses during the period, the company's net profit for the year fell 22.65% year on year, and net profit after deduction fell 11.32% year on year.

First-quarter results improved month-on-month, and overseas market development was further accelerated. In the first quarter, the company achieved revenue of 192 million yuan, down 41.18% year on year, and realized net profit of 32 million yuan, down 47.74% year on year and up 86.01% month on month.

The company's product sales structure and customer structure changed greatly year-on-year in the first quarter, and performance declined year-on-year due to differences in procurement cycles in different downstream industries. The company has strengthened the development of the international stock market and actively developed the international incremental market. Currently, Thailand's Jianlong's orders for molecular sieves from Europe, America and Southeast Asia continue to increase, and production line capacity utilization has greatly increased. In the field of methane purification, the market share of zeolite products has increased significantly in Southeast Asia, and demand is expected to continue to grow in the future. In the first quarter, the company achieved export revenue of about RMB 5.04 million, an increase of 19.63% over the previous year, further showing its advantages in overseas layout. In the future, the company will gradually shift from overseas sales to technology overseas. Currently, Thailand's Jianlong Phase II project is progressing in an orderly manner and is expected to be put into operation by the end of 2024. As the company's internationalization strategy continues to advance, it is expected to bring more room for growth in the company's performance.

The business layout continues to diversify, and new products and new businesses have made positive progress. The company firmly follows a high-quality and differentiated development path, and continues to promote the development and layout of new products around molecular sieve adsorption and catalytic materials as the main research direction in the fields of energy, chemicals, petrochemicals, environmental management, etc. In 2023, the company successfully supplied molecular sieves for overseas gas industry giants to newly built VPSA projects, and also reached the supply of molecular sieves for more than 40,000 square meters of newly built VPSA oxygen generation projects. In the petroleum and petrochemical sector, the company completed the supply of molecular sieves for CNPC Changqing Oilfield's second largest natural gas project in the world and the Tarim Oilfield super-large natural gas project, broadening the application scenarios of the company's products and further consolidating the company's leading position in the industry. In the field of new applications of molecular sieves, the company continues to increase investment in R&D. Good progress was achieved in 2023, with sales revenue of 24 million yuan per month for related new products. Among them, products such as automobile braking systems and air suspension systems have contributed greatly. In total, large-scale sales of the kiloton level have been achieved, and further volume is expected in 2024. In the field of catalysts, the company's products have also achieved sales breakthroughs in the petrochemical field, and catalysts used in petrochemicals have achieved sales breakthroughs of tens of tons or more. The launch and implementation of new products and projects has broadened the application scenarios of the company's products and further consolidated the company's leading position in the same industry.

Profit forecast and investment rating: The company's 2024 and 2025 EPS is estimated to be 2.38 and 3.00 yuan, respectively. Based on the closing price of 34.12 yuan on April 23, PE is 14.34 times and 11.39 times, respectively. The company's valuation is reasonable. In line with the company's development prospects, it maintains the company's “increase in holdings” investment rating.

Risk warning: downstream demand falls short of expectations, and the company's market development progress falls short of expectations