In the first half of the year, the company achieved an operating revenue of 1.454 billion yuan, a year-on-year decrease of 1.90%. The net profit attributable to shareholders of the listed company was 194 million yuan, a year-on-year increase of 18.75%. The earnings per share was 0.37 yuan. The performance was in line with our expectations. The company expects that the net profit for the first three quarters will increase by 10% to 30%.

Ping An Viewpoint:

The commissioning of the issuance project has driven the operation of the company's pesticide intermediates well: The company's industrial business mainly includes pesticide intermediates and pharmaceutical intermediates. Due to the fact that the Duqiao pharmaceutical intermediate base is still under construction, the company's pharmaceutical intermediates had no increase in production in the first half of the year. The revenue was roughly the same as that of the same period last year.

The income of the company's pesticide intermediates increased by 22.54% year-on-year in the first half of the year, and the gross profit margin remained stable (at 42.27%), mainly due to the 300 tons of azoxystrobin produced by the newly issued 300 tons of zoxamide in October 2012 being put into production. The 500 tons of fenbuimic acid and 300 tons of methiocarbamid were put into production in April this year. These new products began to show benefits in the first half of the year. According to the company's interim report, the benefits generated by the three newly issued pesticide intermediates in the first half of the year were 26.79 million yuan.

The significant reduction in non-core trade income led to a slight decline in the company's revenue: Although the company's industrial revenue increased by 13.54% driven by pesticide intermediates, in order to focus on the main business, the company has intentionally reduced the scale of trade since last year. In the first half of this year, it continued to adhere to this strategy. The trade business revenue decreased significantly by 36.89% year-on-year, causing the overall revenue of the company to decline by 1.90%. Currently, the company's revenue structure is more reasonable. The proportion of industrial revenue has increased from 70% in the same period last year to 80% in the first half of this year.

The growth in the second half of the year still depends on the issuance of new pesticide projects: According to the progress of the new project construction of the company, except for the existing production capacity improvement in the second half of the year, the growth will mainly come from the three pesticide intermediates that were already put into production in the first half of the year. We expect that these three products will continue to contribute 30 million to 40 million yuan in profits in the second half of the year. Currently, several ongoing projects of the company are being actively promoted. It is expected that the Duqiao pharmaceutical intermediate project will be completed by the end of this year. At the same time, the subsidiaries Liaoning Tianyu, Shandong Pingyuan, and Yancheng Lianhe have five new products that are also expected to be put into production by the end of this year, laying a foundation for the company's faster growth in performance next year. (Ping An Securities)