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Yangtze Business Daily News● Yangtze Business Daily reporter Shen Yourong

Zhengdan Co., Ltd. (300641.SZ), whose stock price once soared 10 times, has been effectively supported by its operating performance.

On the evening of August 5, Zhengdan Co., Ltd. disclosed its 2024 semi-annual report. In the first half of this year, the company achieved operating income of 1.382 billion yuan, a year-on-year increase of more than 80%; the net profit attributable to the parent company's shareholders (hereinafter referred to as "net profit") was approximately 286 million yuan, a year-on-year increase of more than 10 times.

Zhengdan Co., Ltd. is a fine chemical company whose main product is trimellitic anhydride (TMA). It is one of the few fine chemical companies that can produce TMA using a continuous process.

In the first half of this year, Zhengdan's net profit increased significantly, mainly due to the tight supply of TMA overseas, which led to tight global TMA demand and a sharp rise in prices. With the sharp rise in prices, the company's TMA production capacity was released, which in turn led to a significant increase in net profit.

Zhengdan shares adheres to the guidance of scientific and technological innovation and uses technological progress to refine its main business. As of June 30 this year, the company has 46 authorized patents, including 28 invention patents.

The market predicts that in the short term, the supply and demand of TMA will be difficult to balance, and Zhengdan shares have obvious production capacity advantages. Based on this, foreign capital is optimistic about the company's development prospects. At the end of the second quarter of this year, Morgan Stanley International Co., Ltd. (hereinafter referred to as "Morgan Stanley") and Barclays Bank plc entered the top ten shareholders of Zhengdan shares.

Stock price and net profit both increased 10 times

After the stock price soared 10 times, Zhengdan Co., Ltd. announced that its net profit increased 10 times.

The K-line chart of Zhengdan Co., Ltd. shows that from October 2018 to early February this year, for more than five years, the company's stock price was flat and fluctuated below 6 yuan per share for a long time.

On February 7 this year, the company's stock price hit a new low, with an intraday low of 2.83 yuan per share. Starting from February 8, the stock price rose sharply, with a daily increase of 14.38%. Starting from April 9, the stock price accelerated its rise, setting new highs one after another. On June 13, the intraday high of the stock price reached 36.67 yuan per share, an increase of about 12 times from the intraday low on February 7. Subsequently, the stock price adjusted, and on August 5, the intraday high reached 31.51 yuan per share, still up 1013.43% from the low on February 7.

In addition, from April to the end of May this year, Zhengdan convertible bonds also rose by more than 3 times (Zhengdan convertible bonds have been delisted).

The sharp rise in the share price of Zhengdan Co., Ltd. was not suspected of deliberate speculation by funds, because the market had positive expectations for the company's fundamentals.

This is also confirmed by the semi-annual report of Zhengdan Co., Ltd. According to the semi-annual report, in the first half of this year, Zhengdan Co., Ltd. achieved operating income of 1.382 billion yuan, a year-on-year increase of 86.52%; net profit of 286 million yuan, a year-on-year increase of 1015.51%; net profit after deducting non-recurring gains and losses (referred to as "net profit after deducting non-recurring gains and losses") was 284 million yuan, a year-on-year increase of 1096.88%.

Compared with the same period last year, net profit and non-net profit in the first half of this year increased by more than 10 times.

In fact, in the first quarter of this year, Zhengdan's operating performance has shown a trend of rapid growth. In the first three months, the company's operating income was 518 million yuan, a year-on-year increase of 28.80%; net profit and non-net profit were 58.9925 million yuan and 58.9133 million yuan, respectively, a year-on-year increase of 412.94% and 450.78%.

A comparison shows that in the second quarter of this year, the company's operating income was 864 million yuan, a year-on-year increase of 155.08%; the net profit and non-net profit were 227 million yuan and 225 million yuan respectively, a year-on-year increase of 1505.96% and 1626.45%.

Data shows that operating income, net profit and non-net profit in the second quarter of this year also increased significantly compared with the first quarter.

Zhengdan shares explained that in the first half of this year, due to the unstable supply and tight supply of overseas TMA manufacturers, the overseas market's demand for Chinese TMA has increased significantly. The sales volume and sales unit price of the company's main product TMA have increased significantly compared with the same period last year. At the same time, the sales volume and sales unit price of TOTM products have also increased to a certain extent compared with the same period last year. With the continuous release of the company's TMA and TOTM production capacity, the scale effect has gradually emerged, and the cost rate has dropped significantly. The combination of these two factors has led to a strong growth in the company's net profit.

350 million to expand new TMA production capacity

Due to the imbalance between supply and demand and a large market gap, Zhengdan Co., Ltd. is actively expanding production.

Zhengdan Co., Ltd. is a chemical company headquartered in Zhenjiang, Jiangsu, which mainly deals in chemical raw materials and new materials. The company has long focused on the comprehensive utilization industry chain of C9 aromatics, and has successfully developed special fine chemicals such as trimellitic anhydride, trioctyl trimellitate, vinyl toluene, dioctyl terephthalate, tetramethyl benzene, and high-boiling point aromatic solvents, creating raw material supply and cost advantages for the company, realizing the full and refined utilization of C9 aromatic components, and greatly enhancing the added value of the industrial chain.

In its financial report, Zhengdan Co., Ltd. also stated that the company does not develop fine chemical products in isolation, but is committed to producing high-end, environmentally friendly, high value-added products around the industrial chain.

In 2023, the company launched a 15,000 ton/year polymer specialty resin monomer series product project, which increased equipment utilization efficiency, reduced project investment, and expanded product varieties and production capacity. The company built a nitrogen production project for comprehensive utilization of reaction tail gas, using the medium-pressure nitrogen-rich tail gas discharged from the trimellitic anhydride production unit for comprehensive recycling and utilization to produce high-purity nitrogen and liquid nitrogen products.

In the view of securities analysts, Zhengdan's two trading varieties, TMA and TOTM, are still a niche chemical product overall. China's production capacity accounts for nearly 70%, mainly produced by Zhengdan, Baichuan and TEDA New Materials. Among them, Zhengdan has a production capacity of 86,000 tons, Baichuan has 40,000 tons, and TEDA has 22,000 tons. The foreign production capacity is mainly 70,000 tons from the American chemical giant INEOS. According to the official notice issued by INEOS on April 3, 2024, after an in-depth analysis of the factory situation, cost pressure, market share loss, raw material prospects and global TMA supply, the company decided to stop the TMA production line. This is also the main reason for the imbalance between supply and demand in the TMA market.

Zhengdan shares actively seeks to expand production. On the evening of June 11 this year, the company issued an announcement that it plans to invest 350 million yuan to build a green upgrading and transformation project with an annual output of 65,000 tons of trimellitic anhydride. After the project is completed, it can effectively solve the company's current problem of insufficient TMA production capacity, fill the market gap, and better meet the needs of downstream customers. It is of great significance to further consolidate and improve the company's industry position and build a global TMA leading brand.

It was disclosed that the company's main construction content is to convert the original TOTM unit area and filling station area into a 65,000 tons/year trimellitic anhydride unit area, with a construction period of 24 months.

The Yangtze Business Daily reporter found that foreign investors are optimistic about the development prospects of Zhengdan Shares. At the end of the second quarter of this year, Morgan Stanley and Barclays Bank became the top ten shareholders of the company.

In the second quarter of this year, among the top ten shareholders of Zhengdan Co., Ltd., except for the reduction of holdings due to the expiration of the first phase of the employee stock ownership plan, the shareholdings of the top four shareholders remained unchanged, and the last five shareholders were all new entrants.