Incident: Samsung New Materials released its 2021 annual report. In 2021, the company achieved operating income of 826 million yuan, an increase of 43.52% over the previous year; Guimu's net profit was 984.9981 million yuan, an increase of 18.15% over the previous year, after deducting net profit of 87.07373 million yuan, an increase of 32.23% over the previous year.

The release of production capacity boosted the company's revenue. The company's revenue increased 43.52% year-on-year in 2021, mainly due to the release of production capacity for the first launch project that was consolidated in the previous period, the increase in the company's production capacity in the current period, and the increase in sales orders. The company's annual production project for mid-range and high-end cryogenic storage equipment glass doors and 120,000 sets of large-volume refrigerator glass door production projects in 2020 have been completed, with fixed assets of 2,0366 million yuan and 276.102 million yuan respectively. In addition, the company acquired 20% of Qingdao Weisheng Electronic Plastic Co., Ltd.'s shares and included them in consolidated statements, which also increased the company's operating income to a certain extent. By product, glass doors are the company's main source of revenue. During the reporting period, the company's glass door revenue was 652 million yuan, an increase of 58.6% over the previous year, accounting for 78.95% of revenue. The increase in the company's glass door revenue was mainly driven by sales growth. In 2021, the company's glass door production and sales volume were 397.62 square meters and 384.33 square meters respectively, up 46.14% and 41.95% year-on-year; plastic product revenue was 148 million yuan, an increase of 8.37% over the previous year. The company's plastic product revenue mainly came from Qingdao Weisheng's consolidation; deep-processed glass revenue was 9.481 million yuan, a decrease of 7.79% over the previous year. We think the main reason for the decline was that when demand for glass door products was strong, the company would reduce its commitment to external depth The glass processing order concentrates production capacity on supplying deep-processed glass for the glass door body for private use.

It also showed that Qingdao Weisheng lowered the company's gross profit margin. The company's gross sales margin in 2021 was 18.87%, a year-on-year decrease of 11.22PCT. The main reason was the company's merger with Qingdao Weisheng. Qingdao Weisheng's gross margin is 0.85%, which is a big gap compared to other products. The gross margin of the company's glass doors was 22.88%, a year-on-year decrease of 4.80 PCT. We believe that the main reason for the decline in gross profit of glass doors is the rise in raw material prices and the intensification of competition in the industry market. The gross margin of deep-processed glass was 26.12%, an increase of 5.70 PCT over the previous year, but due to the relatively low revenue share of deep-processed glass, the impact on the company's gross profit was limited. Looking at period expenses, the company's sales, management, R&D and financial expenses in 2021 changed by 32.08%, -15.83%, 57.81% and -25.44%, respectively. The expense rates were 1.42%, 2.29%, 3.19% and 0.93%, respectively, and the year-on-year changes were -2.78%, -2.19%, -0.72% and -0.99% PCT. The main reason for the decline in the company's management expenses ratio was clearly due to the company's higher equity incentive costs in the same period last year. Taken together, the company's net interest rate was 11.55%, down 8.47PCT from the previous year.

The company's production capacity will continue to increase. The company publicly issued A-share convertible corporate bonds in 2019. The total capital raised was RMB 1915.65 million. The capital raised will be invested in the “new deep-processed glass project with an annual output of 3.15 million square meters”. Due to the impact of the COVID-19 pandemic, equipment procurement and installation and commissioning for the project will still take a long time, and the project has been extended until May 2022. After the project is put into operation, the company's production capacity will be further increased. During the reporting period, orders from the company's main old customers grew rapidly. At the same time, they developed high-quality new customers such as Panasonic Cold Chain, and won the trust and support of end customers such as Genqi Forest. As the company's production capacity increases, the company's production capacity can meet the needs of more customer orders, and revenue is expected to increase further.

Investment advice: The company is the leader in glass doors for cryogenic storage equipment. Customers are stable. With the gradual release of production capacity, the company is expected to enjoy industry development dividends and its performance will grow rapidly. The company's net profit attributable to the parent in 2022-2024 is estimated to be 139, 171 and 193 million yuan, and the corresponding EPS is 1.0, 1.23 and 1.38 yuan. It was covered for the first time and given a “recommended” rating.

Risk warning: risk of changes in raw material prices; risk of increased market competition; risk of production capacity falling short of expectations.