Description of the event

The company released its 2024 semi-annual report, achieving revenue of 2.18 billion yuan (+4.6% year over year), realized vested net profit of 0.11 billion yuan (+2.4% year over year), and realized 0.11 billion yuan of attributed deducted non-net profit (+4.9% year over year). Among them, Q2 achieved revenue of 1.16 billion yuan in a single quarter (+2.0% YoY, +14.9% YoY), attributable net profit of 0.08 billion yuan (-6.6% YoY, +102.7% YoY), and realized 0.07 billion yuan of non-net profit (-10.8% YoY, +89.4% YoY).

Incident comments

2024H1 benefited from the rising refrigerant boom, and the gross margin of the company's fluorocarbon chemicals sector increased dramatically. 2024H1's fluorocarbon chemicals achieved operating income of 1.04 billion yuan (-7.6% year over year); average gross profit margin of 20.3% (+11.1pct year on year).

In the first half of the year, sales volume of fluorocarbon chemicals was 0.046 million tons (including sales volume sold as raw materials and mixed with outsourced fluorocarbon chemical components), a year-on-year decrease of 15.1%. 2024Q2, driven by the new peak season, the company's refrigerant sales increased. According to the company's operating data, 24Q2 achieved sales volume of 0.026 million tons of refrigerants (-13.6% YoY, +25.6% YoY) and achieved an average price of 0.022 million yuan/ton (+9.3% YoY, -3.3%). The decline in the company's average price may be due to differences in product structure distribution. According to Baichuan Yingfu, the average domestic sales price of 2024Q2 refrigerants R22, R32, R134a, R125, R143a (Yonghe factory) was 26808, 33220, 31297, 41740, 60,000 yuan/ton, up 28.6%, 11.6%, 11.1% from Q1. According to the General Administration of Customs, the average export price of 2024Q2 refrigerants increased month-on-month, R22, R32, R134a, R125/R143a (excluding tax), 15990 19216, 27553, and 24,713 yuan/ton, up 4.9%, 10.2%, 2.6%, and 0.0% from the average price of Q1. The overall refrigerant fundamentals showed a sharp upward trend.

2024H1 Due to industry influence, the company's fluoropolymer materials boom is under pressure. 2024H1 achieved operating income of 0.83 billion yuan (+35.5% year over year) with an average gross profit margin of 17.0% (-12.4 pct year over year). After deducting the company's internal usage, the company achieved sales volume of 0.02 million tons of fluoropolymer materials (+93.8% year over year). Jin Huayonghe achieved net profit of 72.11 million yuan in the first half of the year (-45.0% YoY), and Shao Wuyong achieved net profit of 19.79 million yuan in the first half of the year (with loss reduction).

The company's new production lines will be put into operation at the end of 2023 and the beginning of 2024. In the first half of 2024, the production of fluorinated polymer materials increased significantly. The main reason for the decline in gross margin: First, due to the large increase in products with relatively low gross margin levels such as PTFE and HFP, which lowered the overall gross profit margin of the sector; second, on the demand side, due to slow recovery in downstream terminal market sentiment, prices of fluoropolymer material products fluctuated downward, and the current decline was gradually narrowing. 2024Q2 achieved export sales of 0.01 million tons of fluorinated polymer materials (+61.7% YoY, +7.2% month-on-month) and achieved an average price of 0.0416 million/ton (-24.2% YoY, -1.2% month-on-month).

In the third quarter, refrigerants maintained a high boom, and varieties were differentiated, and fluorine-containing polymer materials basically bottomed out. The average price of 2024Q3 refrigerant domestic sales R22, R32, R134a, R125, and R143a (Yonghe factory) was 30377, 36281, 31228, 32079, 43294 yuan/ton, a change of 13.3%, 9.2%, -0.2%, -23.1%, and -27.8% from Q2.

In July 2024, the export prices of R22, R32, R134a, R125\ r143a, and R410a (excluding tax) were 18160, 22237, 26821, 21718, and 24537 yuan/ton, respectively, with changes of +12.4%, +6.3%, -4.3%, -5.1%, and -1.9%, 2023Q3, HFP (molding material), FEP (cable material), and PVDF were 36036, 42833, 42833, PVDF 70948, 50,000, 60,000 yuan/ton, -1.3%, -5.9%, -5.4%, 0.0%, 0.0% compared to Q2.

The third-generation refrigerant boom is expected to improve over a long period of time. The company's production capacity in Shaowu and Inner Mongolia has been put into production one after another, and quality has gradually increased. Net profit attributable to 2024-2026 is expected to be $0.31, 0.49, and 0.7 billion yuan, maintaining a “buy” rating.

Risk warning

1. The progress of the new project falls short of expectations;

2. Downstream demand falls short of expectations