Key points of investment

Incident: The company released its 2024 semi-annual report. 2024H1 achieved revenue of 1.435 billion yuan, a year-on-year increase of 26.5%, and net profit to mother of 0.155 billion yuan, an increase of 30.75% over the previous year. Among them, in 2024Q2, the company achieved revenue of 0.801 billion yuan, a year-on-year increase of 29.8%, and net profit to mother of 82.85 million yuan, a year-on-year decrease of 22.6%.

Q2 Revenue reached a record high, and revenue from decorative building materials increased dramatically. In the first half of 2024, despite the complex and severe external macroeconomic environment, the company continued to build recycling and marketing channels to the world on the basis of being deeply involved in the field of renewable plastics for more than 20 years. Among them, 24Q2 achieved revenue of 0.801 billion yuan, an increase of 26.6% over the previous year, reaching a record high. By business: 2024H1, (1) the finished product frame business achieved revenue of 0.612 billion yuan, with a gross profit margin of 31.0%, a year-on-year decrease of 3.8 pcts; (2) the decorative building materials business achieved revenue of 0.45 billion yuan, +60.4% year-on-year, gross margin reached 32.7%, an increase of 2.6 pct; (3) the particle business achieved revenue of 0.182 billion yuan, a year-on-year increase of 6.3 pcts; (4) PET products achieved revenue 0.163 billion yuan, +32.5% year on year, gross margin reached 7.2%, up 7.1 pct year on year; (5) Environmental protection equipment achieved revenue of 0.016 billion yuan, +6.7% year over year, gross profit margin of 59.6%, increase of 1.7 pct year on year.

The second phase of the Vietnam project is under construction, and production capacity is expected to increase further. The company's Vietnam Yingke Thanh Hwa (Phase II) project is under construction, with a total investment of about 60 million US dollars and a construction period of 24 months. After completion, it is expected to have an annual production capacity of 24 environmental protection machinery (sets), 0.03 million tons of recycled plastic particles, 0.045 million tons of decorative building materials, and 22.8 million pieces of high-end decorative frames. As a leading recycled plastics company, in the future, the company will vertically expand the recycling field of PE, PP, HDPE and other plastics on the basis of consolidating the R-PS and r-PET business. The company already has a recycled PS production capacity of about 0.1 million tons/year, has put into production 0.05 million tons/year, and is building 0.1 million tons/year of recycled PET production capacity.

Investment advice and valuation: The company's revenue for 2024-2026 is estimated to be 2.77 billion yuan, 3.118 billion yuan, and 3.539 billion yuan, respectively, with growth rates of 12.8%, 12.6%, and 13.5% respectively, and net profit to mother of 0.266 billion yuan, 0.316 billion yuan, and 0.37 billion yuan respectively, with growth rates of 35.7%, 19.0%, and 17.1% respectively, maintaining the “increase” investment rating.

Risk warning: the risk of overseas sales revenue being relatively high, the risk of project construction falling short of expectations, the risk of multinational supply of raw materials, etc.