Event: exciting Technology disclosed in the mid-2021 report, 21Q2 off-season is not light, the upward trend continues, high-end optical film accelerated growth, product structure continues to optimize, new products continue to release volume, functional film platform preliminary growth, investment layout continues to promote horizontal expansion.

1) the overall operating performance of 21H1 is growing steadily, 21Q2 is not weak in the off-season, and the upward trend continues. The company's 21H1 realized operating income of 846 million yuan, an increase of 54.84% over the same period last year, a net profit of 63.72 million yuan, an increase of 62.36% over the same period last year, and a non-net profit of 56.23 million yuan, an increase of 96.72% over the same period last year. 21Q2 achieved revenue of 465 million yuan in a single quarter, an increase of 56.36 percent over the same period last year and 21.95 percent month-on-month growth, and realized a net profit of 31.2 million yuan, an increase of 46.53 percent over the same period last year. Under the influence of "lack of core and less screen", income continues to grow high, we judge that the upward trend of the company's performance is expected to continue, and the alleviation of chip shortage in the future is expected to further catalyze performance flexibility.

2) short-term cost and expense side factors affect profit performance, cost control and product structure optimization go hand in hand, and the trend of profitability improvement remains unchanged. The company's 21H1 comprehensive gross profit margin is 24.67%, Q2 single-quarter gross profit margin is 23.41%, sales freight is changed to operating cost, etc., and 21H1 net profit rate is 8.37%, exchange loss of about 1.2 million yuan and equity incentive fee of about RMB 16.68 million affect profit performance to a certain extent, but the company continues to improve its process and production, strengthen cost control, and continuously optimize product structure, and the trend of profitability improvement remains unchanged.

The growth rate of high-end optical film is eye-catching, the proportion is increasing, and the growth space is accelerated to open. The revenue of the optical film business in the first half of the year was 561 million yuan, an increase of 26.71% over the same period last year, and the gross profit margin was 26.85% Among them, brightener contributed 198 million in revenue, unchanged from the same period last year; diffusion film increased by 24.96%; and revenue from high-end display optical films for quantum dot film and composite film increased by 239 million, benefiting from the nearly doubling of the trend of upgrade compared with the same period last year, and the proportion of revenue increased to about 28%, an increase of nearly 4pcts compared with the same period last year, and the growth space was accelerated. In 2021, many terminal manufacturers took advantage of the efforts to promote the Mini LED display to start the first year of commercialization, and the outbreak of downstream demand led to the continuous growth of high-end optical film demand. The company actively grasps the penetration opportunity of high-end display technology such as quantum dots and Mini-LED, and its market share continues to increase. In the next three years, the company will continue to improve the production capacity and sales share of high-end optical films such as composite films and quantum dot films, and improve the overall profit margin level.

Significantly benefit from the high prosperity of the photovoltaic industry, photovoltaic backplane film and double-sided battery transparent backplane sales increased. The revenue of 21H1 photovoltaic backplane film reached 239 million yuan, an increase of 139.36% over the same period last year. At present, it has passed the certification and stable delivery of a number of leading companies in the component industry, including Jingke and Longji. New products such as transparent backplane and reflective strips for double-sided batteries have been mass-produced and delivered on a large scale, and production and marketing are booming while capacity expansion continues to advance. The upsurge in the photovoltaic industry has led to a surge in demand for photovoltaic backboards such as TPO and photovoltaic packaging film. The combined market share of POE film and EPE film increased by 11% to 25.5% in 2020 compared with the same period last year, and will continue to rise in the future. At the same time, the company is determined to increase the production capacity of photovoltaic packaging film, in order to coordinate development and strengthen the advantages of the industrial chain, further enhance the competitive position of photovoltaic track, and is expected to benefit from industry development and technology upgrading dividends to continue business growth in the field of new energy.

Multi-point layout of foreign investment, research and development to ensure the continuous volume of new products, functional membrane platform enterprises are taking shape day by day. The company's endogenous epitaxial layout photoelectric display (PET base film, OLED luminescent materials, LCP materials, OCA optical adhesive, etc.), automotive (window film, decorative film, etc.), photovoltaic (solar packaging film, adhesive products and optical adhesive and solar photovoltaic materials, etc.) and other fields. Among them, the revenue of window film 21H1 has achieved a high growth rate of 83.77% to 39.77 million yuan. At present, the company has mass production in two new energy models, and there are good prospects for the vigorous development and growth of domestic new energy vehicles in the future; the annual production capacity of PET basement membrane has reached 50,000 tons, and the performance growth is strong; OCA optical adhesive has initially reached mass production capacity, and it is expected to contribute to the performance one after another in the next few years. Based on the core coating technology, the company focuses on the research and development of functional films, and the investment in 21H1 R & D increases by 23%, accelerating the layout and market expansion of new products, and creating new profit growth points in the future.

Profit forecast and investment advice: we expect the company to achieve a revenue of 2.251xmax 27.37 / 3.439 billion in 2021-2023 and a net profit of 2.02-3.1919-485 million in return to the parent. The current PE is 31.4x/19.9x/13.1x in 2021-2023, maintaining a "buy" rating.

Risk tips: intensified market competition, display technology update iteration, profitability is not as expected.