Event: the company disclosed its semi-annual report of 2022, with revenue of 943 million yuan in the first half of 2022, + 21.40% year-on-year, net profit of 132 million yuan, + 52.53%, and non-return net profit of 120 million yuan, + 48.41% over the same period last year.

In the first half of the year, the company's electrode foil products are fully produced and sold, the price has been improved under the structural optimization, and the profitability has also been improved. 1) full production and full sales in the first half of the year. The company has been ploughing the electrode foil industry for more than 40 years and is a domestic leader in electrode foil. In the first half of 2022, the production and operation of the company was not disturbed by the epidemic and other external adverse factors, and the company successfully achieved full production and full sales, and the company's non-public offering fund-raising projects were promoted on schedule, and some projects reached production on schedule. 2) the product structure is optimized and the price is improved. The company's electrode foil products cover a full range of low-voltage, medium-voltage and high-voltage. In recent years, we continue to optimize the product structure and increase the proportion of high-end products. In the first half of 2022, the demand of downstream emerging markets such as new energy vehicles and new energy power generation continued to grow. The company's output of medium and high voltage products accounted for 2% of the total output, while the output value reached 3%, and the average product price increased. In the future, fund-raising projects will continue to be put into production, the proportion of high-end products will further increase, and the average price of products is expected to rise. 3) the profitability of the company will be further improved. In the first half of 2022, the company's sales gross profit margin / net sales margin increased to 27.39% and 14.02% respectively compared with the first half of 2021. The product structure will continue to be optimized in the future, and profitability is expected to be further improved.

With the continuous ploughing of electrode foil, the company's production capacity will be greatly expanded after the non-public offering project and Ningxia Haili project are put into production in 2020. 1) the 2020 non-public offering project is expected to be completed by the end of 2022:

In 2020, the company's non-public offering raised a total of 760 million yuan to build a number of corroded and formed foil projects, which are expected to be completed by the end of this year, with an annual production capacity of 11.1 million square meters.

2) Ningxia Haili newly signed 19 million square meters production capacity project: in March 2022, the company signed an investment agreement with the management committee of Ningxia Shizuishan High-tech Zone to invest 1.5 billion yuan to build 72 production lines, which will be carried out in two phases. the first phase of the project is expected to reach production in October 2023, the overall project reached production capacity of about 19 million square meters of electrode foil. After the private project and Ningxia Haili project are put into production, the company's electrode foil production capacity will exceed 50 million square meters (about 30 million square meters in 2021), and the new project products are mainly high-performance electrode foil, and the company's profitability will also be improved.

Profit forecast and investment suggestion: it is estimated that the net profit from 2022 to 2024 will be 3.39 billion yuan. Considering the expansion of the company's production capacity and the increase in the average price, the company was given an "overweight" rating for the first time.

Risk tips: downstream demand is lower than expected, product prices fluctuate, and projects under construction are not as expected.