Core Viewpoint - The chairman of Jiangsu Baichuan High-tech New Materials Co., Ltd., Zheng Tiejiang, has been placed under investigation and detention by the Jiangyin Municipal Supervisory Committee, leading to a significant drop in the company's stock price and raising concerns about its financial stability and ongoing projects [2][9]. Company Overview - Jiangsu Baichuan High-tech New Materials Co., Ltd. was founded in 2002, with Zheng Tiejiang holding a 75% stake initially. The company has undergone several changes in ownership structure, with Zheng and his family remaining the primary shareholders [4]. - The company has faced financial difficulties, with a significant drop in revenue from 2014 to 2016, but saw a recovery in subsequent years, primarily driven by its traditional chemical business rather than its newer energy materials segment [6][7]. Financial Performance - In 2023, Baichuan's new materials and energy businesses reported negative gross margins of -4.76% and 0.51%, respectively, contributing to an overall net loss of 466 million yuan [6]. - The company reported a gross margin of -1.95% for its new materials business and -38.69% for its energy business in 2024, although its chemical business improved to a gross margin of 16.90%, allowing the company to return to profitability [7]. Shareholding and Financial Issues - As of March 2023, Zheng Tiejiang had pledged 36,397,500 shares, representing 6.12% of the company's total shares and 43.16% of his holdings, primarily for personal financing needs [8]. - Baichuan's financial situation is strained, with a significant liquidity gap, as its current assets of 3.016 billion yuan are overshadowed by current liabilities of 7.637 billion yuan, indicating a need for financial restructuring [8]. Impact of Leadership Changes - The detention of Zheng Tiejiang introduces uncertainty to ongoing projects, particularly in the energy sector, which has already been underperforming [9]. - The increasing regulatory scrutiny in the capital market reflects a broader trend of tightening oversight, which may impact investor confidence and the company's operational stability [9].

Investment Rating - The report assigns a "Buy" rating to the company, indicating an expected performance that will exceed the market by over 20% [34]. Core Insights - The company achieved a revenue of 1.167 billion yuan in 2024, representing a year-on-year increase of 146.02%, and a net profit attributable to shareholders of 600 million yuan, reflecting a staggering growth of 1112.41% [9][12][13]. - The significant increase in performance is attributed to the supply-demand imbalance in Terephthalic Acid (TMA), which led to a substantial rise in product prices [12][22]. - The company is a key player in the production of TMA, which is essential for producing environmentally friendly plasticizers, high-end powder coatings, and advanced insulation materials [9][10]. Summary by Sections Company Performance - In 2024, the company reported a gross margin of 64.89% and a net profit margin of 51.37%, indicating a rapid improvement in profitability [13][16]. - The overseas revenue reached 312 million yuan, marking a year-on-year increase of 1033.96% [9]. Industry Dynamics - The report highlights a continuous exit of overseas TMA production capacity, with China's share of global TMA production capacity increasing to 83.78% following the exit of 70,000 tons of capacity from the U.S. company INEOS [17][19]. - The global TMA demand is projected to be around 200,000 to 210,000 tons in 2024, while the actual supply is expected to be only 140,000 tons, resulting in a supply-demand gap of 60,000 tons [19][22]. Competitive Advantages - The company plans to invest in expanding its production capacity by 30,000 tons of TMA and 1,500 tons of Isophthalic Acid, with a total investment of approximately 232.61 million yuan [24]. - The company utilizes a segmented oxidation method for TMA production, which offers advantages in yield, cost, and operational ease compared to traditional continuous oxidation methods [24][28].