Key takeaway

In 1H26, amid industry disruptions from changes in the external geopolitical environment and a gradual recovery in supplydemand dynamics, the company achieved simultaneous revenue and profit growth through stable production and operations as well as continued cost reductions and efficiency improvements. Its results were in line with market expectations. The company also accelerated its strategic expansion into new energy and new materials products. Projects including the gasification platform upgrade and the melamine resin monomer material project progressed on schedule. We are optimistic that the company will continue to deepen its competitive moat while the industry remains near the bottom of the cycle. The construction and commissioning of numerous high-end new materials projects will also support high-quality growth over the medium to long term.

Event

1) In 1H26, the company generated revenue of RMB17.162bn, up 8.87% YoY, and net profit attributable to shareholders of the parent company of RMB2.353bn, up 49.90% YoY. In 2Q26, revenue reached RMB8.819bn, up 10.35% YoY and 5.70% QoQ, while net profit attributable to shareholders of the parent company reached RMB1.236bn, up 43.43% YoY and 10.73% QoQ.

2) The company also announced its proposed interim dividend distribution plan for 2026. It plans to distribute a cash dividend of RMB0.26 per share, including tax, for a total cash distribution of approximately RMB715mn, representing 30.39% of its net profit attributable to shareholders of the parent company in 1H26.

Risks:

(1) Risk of greater-than-expected fluctuations in product and raw material prices: The company mainly uses coal as a raw material, and fluctuations in coal prices have a significant impact on production costs. Although raw coal prices declined YoY in 2025, cushioning the impact of lower product prices on profit, thermal coal prices have recently shown signs of a modest rebound. If coal prices rise sharply in the future while downstream chemical product prices cannot increase accordingly due to supply-demand dynamics, product spreads will narrow and directly squeeze the company's profit margins.

(2) Risks of stricter safety and environmental policies: Under China's “carbon neutrality and carbon emission peaking” goals and environmental protection requirements, environmental standards in the chemical industry continue to tighten. As an energy-intensive industry and a key industry under safety and environmental supervision, the coal chemical industry may face impacts from increasingly stringent safety and environmental policies as well as rising compliance costs, potentially affecting operational indicators such as production capacity utilization rates.

(3) Risks associated with new capacity ramp-up and market absorption: The company has continued to expand its scale in recent years. As new capacity comes online in a concentrated manner, failure of downstream demand to keep pace may intensify competition in some chemical product markets. Meanwhile, large -scale capital expenditure also places greater demands on the company's cash flow management and capital structure. If project returns fall short of expectations after production begins, the company's return on assets will be affected.