1H22 results in line with our forecast Lier Chemical announced its 1H22 results: Revenue rose 60.7% YoY to around Rmb5.08bn and net profit attributable to shareholders surged 107.5% YoY to about Rmb1.05bn, implying EPS of Rmb1.41. In 2Q22, net profit attributable to shareholders soared 80.6% YoY to Rmb513mn. The 1H22 results are in line with our forecasts. Lier Chemical attributes the high earnings growth to strong market demand and increases in both sales volume and prices. Meanwhile, Lier Chemical released a proposal on remuneration and performance evaluation for its management team in 2022. According to this proposal, if the firm’s net profit stays between Rmb1.07bn and Rmb1.18bn in 2022, Lier Chemical would earmark 5% of the additional profit (actual profit - Rmb1.07bn) to reward its major executives and technicians. If its net profit exceeds Rmb1.18bn, the company would earmark 10% of the additional profit (actual profit - Rmb1.18bn) to reward them. Based on our 2022 earnings forecasts, we think Lier Chemical could earmark about Rmb55mn to reward its major executives and technicians. In addition, Lier Chemical announced that its board of directors approved three projects, i.e., an automation and facility renovation project in Mianyang, Sichuan; a 20,000t butanoic acid project in Jinshi, Hunan; and a 11,000t pesticide project in Guang’an, Sichuan. Trends to watch Glyphosate prices to decline slowly in 2H22. The prices stayed high in 2Q22 as agricultural product prices remained elevated. According to www.baiinfo.com, glyphosate prices averaged Rmb223,000/t in 2Q22, up 19.9% YoY and down 14.5% QoQ. We expect glyphosate supply to become loose as new production facilities at Xinan Chemical and Limin Group come online in 2H22. Therefore, we think glyphosate prices could decline slowly. Capex increases steadily. We are upbeat on Lier Chemical’s transformation into a leading producer of comprehensive pesticide active ingredients. The firm’s capex surged 105.1% YoY to Rmb720mn in 1H22, close to the level of Rmb800mn in 2021. We think Lier Chemical could shift from being a leading producer of glyphosate active ingredients to a supplier of comprehensive pesticide active ingredients as its new projects (e.g., the aforementioned 20,000t butanoic acid project, as well as chlorantraniliprole and cyantraniliprole projects) gradually start production. We think this could drive stable earnings growth in the long term. Financials and valuation We raise our 2022 and 2023 earnings forecasts 46.6% and 36.6% to Rmb1.71bn and Rmb1.79bn given that glyphosate prices remain high. The stock is trading at 10.1x 2022e and 9.7x 2023e P/E. Maintain OUTPERFORM. Given the firm’s earnings forecasts and valuations, we maintain our target price of Rmb28.60 (excluding impact of share capital changes), implying 12.5x 2022e and 11.9x 2023e P/E and offering 22.7% upside. Risks Sharp declines in glyphosate prices; slower-than-expected progress in commencement of production of new projects.