Event: The company publishes its 2024 semi-annual report. 24H1 achieved operating income of 0.718 billion yuan, a year-on-year increase of 3.13%; realized net profit to mother of 0.113 billion yuan, a year-on-year decrease of 20.87%. Among them, 24Q2 achieved operating income of 0.364 billion yuan, a year-on-year increase of 4.99%, and a month-on-month increase of 2.92%; realized net profit to mother of 0.057 billion yuan, a year-on-year decrease of 20.10% and an increase of 4.38% month-on-month.

Sales of 24H1 maleic anhydride derivatives increased year-on-year, and 24Q2 performance achieved month-on-month growth. The company focuses on the development and production of maleic anhydride derivatives and functional material intermediates. 24H1 achieved sales volume of 0.042 million tons of maleic anhydride, up 1.39% year on year, and achieved revenue of 0.51 billion yuan, up 3.13% year on year, gross margin of 20.45%, down 7.42 pct year on year; functional material intermediates achieved revenue of 0.14 billion yuan, up 25.23% year on year, gross margin of 37.73%, down 6.48 pcts year on year. In terms of expense ratios, 24H1's sales, management, R&D, and finance expense ratios were 0.44%, 2.68%, 5.18%, and -2.40%, respectively. The year-on-year decrease was 0.02, 0.05, 0.18, and 0.7 pct, respectively. Among them, changes in financial expenses were mainly due to an increase in interest income from time deposits.

The leading company in the production of maleic anhydride derivatives has a stable position, and projects under construction are progressing steadily. The company is a leading manufacturer of maleic anhydride derivatives in China. Its products are widely used in electronic component packaging materials, electrical equipment insulation materials, coatings, composites, etc. As of April 1, '24, the production capacity of the company's maleic anhydride derivatives came from the Puyang production base and the Shandong production base, with a capacity utilization rate of 113.47%. The company has successively carried out technical modifications and product optimization at the two bases. At the same time, the maleic anhydride derivatives and R&D center projects under construction are expected to reach the scheduled state of use in December '24.

Strong R&D strength, remarkable advantages in customer resources and flexible production. The company has now mastered advanced R&D technology and production technology, and its main products have independent intellectual property rights. The company is a national high-tech enterprise. It has obtained 104 authorized patents (63 invention patents, 41 utility model patents) and 24H1 authorized 1 invention patent. At the same time, through years of technological innovation and market development, the company's products have formed a good reputation in domestic and foreign markets. Customers include many internationally renowned customers such as Huntsman (Huntsman), Westlake, and OLED material vendors. Furthermore, in order to meet the diverse needs of the market, the company has established a flexible production method, which can be adjusted according to changes in actual orders to improve the rapid response capacity of the production process to the market and the efficiency of the utilization of production resources, thereby maximizing the utilization of production capacity.

Profit forecast, valuation and rating: Due to the delay in the commissioning of the company's projects under construction, we lowered the company's 24-26 profit forecast. The company's net profit for 24-26 is estimated to be 2.36 (down 20.6%) /2.79 (down 20.9%) /3.18 (20.7%) billion yuan, respectively. Since demand for the company's downstream power grids and wind power for maleic anhydride derivatives is still strong, along with the company's continuous expansion of production capacity, the company's business conditions will improve, and we will still maintain the company's “buy” rating.

Risk warning: Product and raw material prices fluctuate, capacity construction falls short of expectations, product verification risks.