Performance Overview: In the first half of 2024, the company achieved operating income of 0.356 billion yuan, +32.68% year on year; net profit to mother 0.115 billion yuan, +216.75% year over year; net profit after deducting non-return to mother 0.054 billion yuan, +64.97% year over year.

The “Trinity” supports the company's high performance growth. I am optimistic that the solution will confirm revenue in the second half of the year. The situation in each business segment of 24H1 is as follows:

1. Heavy metal pollution prevention and control comprehensive solution business: achieved revenue of 0.105 billion yuan, -15.8% year-on-year, accounting for 29% of total revenue. Revenue recognition for the company's solutions business has seasonal factors. It was mostly confirmed in the second half of the year. In the first half of 22-23, the company's solutions division's revenue accounted for only about 25% of the segment's annual revenue.

2. Product sales business: Achieved revenue of 0.117 billion yuan, +109.8% year-on-year, accounting for 33% of total revenue.

The division also contributed to the high revenue growth of major Zijin Pharmaceuticals (24H1 Zijin Pharmaceuticals achieved revenue of 0.061 billion yuan and net profit of 0.015 billion yuan).

3. Operation service business: Achieved revenue of 0.131 billion yuan, +54.1% year-on-year, accounting for 37% of total revenue.

Under the three-in-one business model, the company uses increments (solutions) to promote inventory (product sales and operation services), smoothly increase inventory, promote mutual promotion and collaborative development.

Zijin Mining, the second shareholder, continues to be empowered. The wholly-owned acquisition of Zijin Pharmaceutical's product Moat 24H1 Company and the second-largest shareholder Zijin Mining achieved related transaction revenue of 0.083 billion yuan, +14%; added Australia's Norton Jintian project operation services, Heilongjiang Duobaoshan Copper project pharmaceutical sales, etc. The related transactions are expected to be about 0.45 billion yuan throughout the year, and the shareholder empowerment results are remarkable.

In February '24, the company completed the wholly-owned acquisition of the participating company Zijin Pharmaceutical. It combined high-efficiency mineral processing agents with heavy metal pollution prevention and control technology and products, forming group advantages and technical barriers, and building new core competitiveness, which helped the company expand in new fields, multiple scenarios, and globally.

Continue to increase investment in R&D to enhance technological competitive advantage

In the first half of 2024, the company's R&D expenses were 0.019 billion yuan, an increase of 19.2% over the previous year; 8 new patents were applied for, 8 new authorized patents were added, and it is expected that 20 new patents will be applied for throughout the year, and 12 new authorized patents will be added; 17 projects are under development, and some projects are expected to reach the leading international level. While strengthening its independent research and development capabilities, the company has maintained industry-university-research partnerships with research institutes of universities such as Central South University for a long time, focusing on cutting-edge research and strengthening industrialization promotion, and is committed to becoming a leading enterprise in the field of heavy metal pollution prevention and resource utilization.

Investment advice: We forecast the company's net profit to be 0.202, 0.222, and 0.277 billion yuan in 2024 to 2026, up 123%, 10%, and 25% year-on-year respectively (0.16 billion yuan before the 24-year forecast. As the company completed the acquisition of Zijin Pharmaceutical, we raised our profit forecast); diluted EPS was 2.12, 2.32, and 2.90 yuan, respectively. The stock price on September 3 was 11.21, 10.21, and 8.17 times, respectively. Maintain a “buy” rating.

Risk warning: risk of order growth falling short of expectations; poor repayment of accounts receivable, risk of impairment; risk of increased market competition and declining profit margins; risk of high customer concentration and changes in partnerships