Incidents: The company released its 2022 semi-annual report. It achieved revenue of 1,067 million yuan in the first half of the year, down 10.87% from the previous year; Guimu's net profit was 103 million yuan, down 57.62% from the previous year; after deducting non-net profit of 40 million yuan, a decrease of 56.13% over the previous year.
The gross margin of copper foil remained high, and downstream demand for CCL and PCB fell short of the expected performance. 1) Copper foil revenue declined slightly, and gross margin remained high: 22H1 copper foil business revenue was 708 million yuan, down 1.53% year on year, gross profit margin was 24.26%, -4.18pct year on year, or affected by the marginal easing of industry supply and demand constraints and the overall reduction in processing fee levels, but the gross margin level of the business remained high in the industry (22H1 revealed that the gross margin range of listed companies in the same industry was about 16% to 24%). 2) Demand for CCL and PCBs fell short of expectations, and performance was under pressure: The company has a CCL production capacity of 12 million sheets/year and a PCB production capacity of 7.4 million square meters/year. Downstream demand is mainly in consumer electronics, automotive electronics, IDC, communication equipment and other industries. Market demand in 22H1 consumer electronics and other industries was weak, putting pressure on the CCL and PCB business. Gross margin fell 6.09pct/0.68pct to 9.53%/7.04%, respectively. Some subsidiaries were in a state of loss. Among them, Guangzhou Taihua announced the cessation of production and rectification in mid-August.
It is planned to expand production capacity by 5 times, and the share of high-end products such as lithium battery copper foil is expected to increase. The company currently has a production capacity of 20,000 tons/year of copper foil, mainly copper foil for electronic circuits used in copper-clad plates (CCL) and printed circuit boards (PCBs). 1) The company plans to steadily advance the production capacity of 100,000 tons of copper foil for the Guangxi Yulin project:
In February 2021, the company signed a cooperation agreement with the Yulin Municipal Government and Yuchai Industrial Park to build a project with an annual output of 100,000 tons of high-precision electronic copper foil and a high-end core board with an annual output of 10 million sheets. The first phase of construction of 50,000 tons (20,000 tons of lithium battery copper foil+30,000 tons of electronic copper foil) is progressing steadily. It is expected that partial trial production will be carried out in 2022. 2) Standard foil can be converted to lithium battery copper foil: 22H1 Company has remodeled equipment in some factories and converted some standard foil production lines to lithium battery copper foil. At present, mass production has continued to be stable. 3) The share of high-end products is expected to increase, further improving profit levels: In terms of lithium battery copper foil, the company already has mass production capacity for 6 μm, high-frequency, high-speed copper foils, and has successfully developed 4.5 μm products; in terms of other high-end products, high-end products such as RTF copper foil and VLP copper foil are driving mass production or market introduction. The company's customers include most of the leading companies in the PCB and CCL fields, and developed many new lithium battery companies such as Yinlong New Energy, Bick Battery, and Penghui Energy to help upgrade the product structure.
Profit forecast and investment suggestions: Considering the continuous expansion of the company's copper foil production capacity, it is estimated that the net profit returned to the mother in 2022/2023/2024 was 0.9/16/250 million yuan, covering the “increase in holdings” rating for the first time.
Risk warning: downstream demand falls short of expectations, product prices fluctuate, and projects under construction fall short of expectations