The company announced third-quarter results: Q3 achieved revenue of 3.67 billion yuan (Blue Sky 1.81 billion yuan), -2% YoY; net profit to mother 0.32 billion yuan (Blue Sky was 0.16 billion yuan), +53% YoY. In the first three quarters, the company achieved revenue of 10.2 billion yuan (Blue Sky 4.9 billion yuan), -12% YoY; net profit to mother was 0.85 billion yuan (Blue Sky 0.33 billion yuan), or -19% YoY. The Q3 performance was slightly lower than our forward-looking expectations (0.5 billion yuan), which we believe was mainly affected by the fluorine materials boom. The company completed the restructuring, and Sinochem Blue Sky was included in the scope of the company's consolidated statements. Considering the contribution of the Blue Sky refrigerant boom and the successive implementation of the company's key projects in the future, it is expected that there is still room for growth in 25-26. Maintain a “buy” rating.

The restructuring of Sinochem Blue Sky was completed, and efficiency improved year-on-year

The company completed the merger, acquisition and restructuring of Sinochem Blue Sky. Sinochem Blue Sky achieved net profit of 0.33 billion yuan in the first three quarters, with a year-on-year increase of 4.2 pct in consolidated gross margin; net profit to mother of 0.163 billion yuan was achieved in Q3. Benefiting from favorable quota policies, refrigerant production and sales were strong. In the first three quarters, sales volume was 0.094 million tons, corresponding revenue of 2.8 billion yuan, and the average sales price was +17%. We believe that the merger of Sinochem Blue Sky will help enhance the company's overall profitability and help the company continue to grow.

Price differences of major products are under pressure. The year-on-year decline in Haohua's Q3 profit was affected by the continuous decline in the market price of fluoropolymer products and the double squeeze of rising prices of major raw materials. Haohua's Q3 net profit fell 16% year on year, putting some pressure on it. According to Baichuan Yingfu, the average price of PTFE/FKM in the third quarter was -6%/-11% month-on-month; the company's sales volume was +14%/+9%, respectively, and price compensation was effective.

Demand for specialty coatings was strong. Q3 sales increased 22%, average price increased 7%, and volume and price rose sharply. Sales of rubber products/special tires/catalysts were stable, and prices rose to varying degrees; prices of new polyurethane materials were stable, and sales increased 24.6% year on year. At present, the fluoropolymers sector has not improved, and we believe that the company still remains profitable and resilient by relying on the high-end manufacturing sector.

The new project will lead future growth. The deepening reform of state-owned enterprises has helped the key projects of the Value Revaluation Company advance in an orderly manner; construction of the Southwest Electronics Special Gas Project has begun; the Shuguangyuan Aviation Tire Project and the Southwest Hospital Catalytic Materials Project have carried out trial production; the Chenguangyuan Organic Fluorine Material Project and the Limingyuan Special New Material Project have carried out civil construction, installation, construction, and trial production preparations. With the implementation of key projects, it is expected that the company's performance will be further enhanced in the future.

As a new materials platform company under Sinochem, the company's long-term investment value is also expected to be highlighted in the context of deepening state-owned enterprise reforms.

Profit forecasting and valuation

The company completed the merger with Blue Sky. We predict that the company's net profit for 24-26 will be 1.22/1.7/1.97 billion yuan, and the corresponding EPS will be 1.10/1.53/1.78 yuan. Comparable, the company's 25-year Wind unanimously expected an average of 29xPE, giving 25-year 29xPE, with a target price of 44.37 yuan, maintaining a “buy” rating.

Risk warning: New project progress falls short of expectations; competition for fluorine materials etc. intensifies; integration and collaboration fall short of expectations.