Investment Rating - The report maintains a "Buy" rating for the company with a target price of 20.90 CNY based on a projected EPS of 0.95, 1.35, and 1.79 CNY for 2025-2027 [4][7]. Core Views - The company experienced a year-on-year revenue growth of 6.84% in Q2, driven by a 9.20% increase in pesticide sales, despite a 1.26% decline in average product prices [10]. - The company's gross profit margin for Q2 was 23.79%, remaining stable year-on-year, while net profit increased by 35.24% to 0.97 billion CNY due to reduced asset impairment losses [10]. - The Hengning base is expected to continue reducing losses as its operational efficiency improves, potentially contributing positively in the future [10]. Financial Summary - Revenue for 2023 is projected at 4,398 million CNY, with a decline of 3.0% year-on-year, followed by a forecasted increase of 23.6% in 2025 [6]. - Operating profit is expected to drop to 242 million CNY in 2024, a decrease of 57.5%, before recovering to 378 million CNY in 2025 [6]. - The net profit attributable to the parent company is forecasted to be 473 million CNY in 2023, with a significant drop of 61.7% in 2024, followed by a recovery to 324 million CNY in 2025 [6]. - The company’s gross margin is expected to decline to 23.9% in 2024, before gradually improving to 25.7% by 2027 [6].

Core Viewpoint - The company's second-quarter performance showed a year-on-year increase driven by sales growth and a reduction in impairment losses, despite a generally low industry sentiment and price pressures on key products [1][2]. Group 1: Sales and Financial Performance - The company's pesticide business saw a 9.20% year-on-year increase in sales volume in the second quarter, leading to a revenue of 1.345 billion, which is a 6.84% increase year-on-year [1]. - The average price of the company's pesticide products decreased by 1.26% year-on-year in the second quarter, indicating stabilization after a period of decline [1]. - The net profit attributable to the parent company reached 97 million in the second quarter, reflecting a year-on-year growth of 35.24%, primarily due to reduced asset impairment losses [1]. Group 2: Operational Developments - The Hengning subsidiary, a key growth driver for the company, has seen an increase in operational efficiency, with total assets reaching nearly 2 billion [1]. - The Hengning project has faced challenges since its initial production in June 2022, resulting in losses of 141 million and 163 million for 2023 and 2024, respectively, attributed to high initial investment and low utilization rates [2]. - Improvements in the Hengning project are expected as production capacity utilization increases, leading to a reduction in losses and potential positive contributions in the future [2]. Group 3: Profit Forecast and Investment Recommendations - Due to the declining prices of key products in the pesticide industry, the company's earnings per share (EPS) forecasts for 2025-2027 have been adjusted to 0.95, 1.35, and 1.79, down from previous estimates [3]. - The target price is set at 20.90, based on a 22 times price-to-earnings ratio for comparable companies, while maintaining a buy rating [3].