The company released its 2024 three-quarter report: During the reporting period, after the merger of Sinochem Blue Sky, the company achieved revenue of 10.207 billion yuan (YoY -12%), net profit of 0.851 billion yuan (YoY -19%), and net profit of 0.578 billion yuan (YoY -15%) after deducting non-attributable net profit of 0.578 billion yuan (YoY -15%), of which Sinochem Blue Sky achieved revenue of 4.946 billion yuan and net profit to mother of 0.328 billion yuan. 24Q3 achieved revenue of 3.67 billion yuan (YoY -2%), net profit to mother of 0.315 billion yuan (YoY +53%), and net profit of 0.209 billion yuan (YoY +17%) in a single quarter, of which Sinochem Blue Sky achieved revenue of 1.814 billion yuan and net profit of 0.163 billion yuan to mother. In 24Q3, after the merger of Sinochem Blue Sky, the company's revenue declined slightly, but the overall gross margin increased 1.06 pct year over year, while quarterly profit achieved rapid year-on-year growth. This mainly benefited from the profit recovery of Sinochem Blue Sky's refrigerant business, which drove Sinochem Blue Sky's net profit to mother up more than 6 times year on year, and gross margin increased 5.9 pct.

Looking at the division of the former Haohua Technology and Sinochem Blue Sky businesses: Haohua Technology: Affected by the continuous decline in the market price of fluoropolymer products and the double squeeze of rising prices of major raw materials, Q3 net profit fell 15.64% year on year. By product, polytetrafluoroethylene resin and fluororubber increased their market development efforts and achieved certain results with volume compensation, with sales increasing by 13.9% and 9%, respectively; demand in the specialty coatings market was strong, with volume and price increases of 21.9% and 7.3% respectively; sales of rubber products, special tires, and catalysts were stable, and prices rose to varying degrees; prices of new polyurethane materials were stable, and sales increased 24.6% year on year. Sinochem Blue Sky: 1) Production and sales of refrigerants are booming due to favorable quota policies, and profitability has increased dramatically; 2) PVDF products have implemented a differentiated competitive route layout to consolidate advantages in the lithium battery field while actively exploring traditional fields such as products and coatings to increase the proportion of high-value-added products; 3) Electrolytes strengthen technical marketing capabilities, promote the development of high-quality customers and high-quality projects, increase market share, and continuously optimize process technology routes. The cost reduction results are remarkable.

After the merger of Sinochem Blue Sky, the fluorine chemical industry chain was rapidly integrated, and the refrigerant business brought about flexible performance. On August 1, 2024, the company announced that all 52.81% of Sinochem Blue Sky's shares held by Sinochem Group and 47.19% of Sinochem Blue Sky's shares held by Sinochem Asset have been transferred and registered under the company's name. The registration procedure for changing 100% of Sinochem Blue Sky's shares has been completed, and Sinochem Blue Sky has become a wholly-owned subsidiary of the listed company.

Sinochem Blue Sky's business covers fluoride lithium battery materials, fluorocarbon chemicals, fluoropolymers and fluorine fine chemicals. Among them, Sinochem Blue Sky's third-generation refrigerant quota is in the first tier in China. According to Baichuan Yingfu's quotation, the R32 long-term price continued to rise in the third quarter, but the increase between R22 and R134a was relatively small, and the average price of R125 fell by nearly 0.01 million/ton month-on-month. We estimate that the average domestic trade price of several mainstream refrigerants in 24Q3 was 32,208 yuan/ton, up about 244 yuan/ton from month to month. Tons, the average foreign trade price was 27,262 yuan/ton, up from month to month About 2,093 yuan/ton. Looking ahead to the fourth quarter, it is expected that the average price of refrigerants will continue to rise month-on-month. As of October 28, 2024, we estimate that the average domestic trade price of several mainstream refrigerants in 24Q4 was 34,112 yuan/ton, an increase of about 1,900 yuan/ton, and the average foreign trade price was 29,646 yuan/ton, an increase of about 2,400 yuan/ton.

In terms of project construction: Haohua Gas Southwest Electronics Special Gas Project has begun; Shuguangyuan's 0.1 million/year civil aviation tire project and the Southwest China Clean Energy Catalytic Materials Industrialization Base Project have carried out trial production; Sinochem Blue Sky Electronic Materials (Chenzhou) Co., Ltd. has carried out civil construction and installation construction; Chenguangyuan 0.026 million tons/year high-performance organic fluorine materials project, Limingyuan's 46600 tons/year special new materials project and related raw material industrialization capacity building projects have carried out civil construction, installation, and testing Production preparations, etc.

Investment analysis opinion: In Q3, Sinochem Blue Sky achieved the merger. Due to the limited data previously disclosed by Sinochem Blue Sky and deviations in the revenue and profit structure, we now expect the company's 2024-2026 revenue to be 14.7, 16.6, and 18.7 billion yuan respectively (original values were 11.5, 18.1, and 20.6 billion yuan), maintaining the company's net profit forecast for 2024 at 1.294 billion yuan. Considering that domestic renewable energy related materials are under high competitive pressure, and the domestic and foreign trade price differences for refrigerants still exist. The company's 2025-2026 net profit forecast was lowered to 100 million yuan 1.963 billion yuan and 2.513 billion yuan (the original value was 2.352 and 3.049 billion yuan), and the current market capitalization corresponds to PE of 29, 19, and 15X, respectively. According to Wind's unanimous expectations, it is comparable to the average PE of the companies Juhua Co., Ltd., China Shipbuilding Special Gas, and Sanmei Co., Ltd. in 2024 to 33X, maintaining the “gain” rating.

Risk warning: 1) the release of new production capacity fell short of expectations; 2) product prices fell sharply; 3) raw material prices rose sharply.