Double Star New Materials is a leading BOPET film enterprise in China, with a BOPET production capacity of more than one million tons, optical, photovoltaic, information materials and other leading products continue to develop, and the gross profit of new materials accounts for more than 85%. The company relies on scale and technical advantages, layout PET composite copper foil, significant cost advantages, aiming at the battery current collector broad market, and further expand the growth space. We estimate that the return net profit of the company from 2022 to 2024 is 17.94,24.91 and 3.182 billion yuan, respectively, and the corresponding EPS forecasts are 1.55,2.15,2.75 yuan respectively. With reference to the comparable company valuation, the company is given a target price of 30 yuan, corresponding to 19 times PE in 2022, covering for the first time and giving a "buy" rating.

The company is a leading BOPET film enterprise, rapidly improving its profitability across the inflection point. Double star new materials for China's BOPET film leading enterprises, 2019 optical film materials to achieve a breakthrough, product volume and price rise, profitability increased rapidly. The company's performance maintained rapid growth in 2021, 2022H1 maintained a high profit under the high prices of crude oil and PTA, and realized revenue and return net profit of 34.8yuan and 714 million yuan respectively, which was + 32% and + 18% respectively compared with the same period last year. We expect that as crude oil prices fluctuate downward, the pressure on the cost side of the company's 22H2 will ease, and earnings are expected to improve month-on-month. The gross profit ratio of the company's optical material film, photovoltaic back material film and other high-end new materials is gradually increasing. We expect that the gross profit ratio of the company's new materials will reach 85% and 93% in 2022-2023, and the properties of the company's new materials will be further strengthened.

The production capacity of optical, photovoltaic and other leading products is expanding, new products are iterated rapidly, and the market share is expected to further increase.

The first phase production capacity of 200 million square meters optical film was completed by the end of 2021, and the second phase production capacity of 200000 tons was gradually put into production in the first half of 2022, and the production capacity was further expanded. 2022H2 company expects to have photovoltaic enhanced PET substrate, PETG heat shrinkable materials and other new capacity release, high-end functional film market share is expected to further increase. The expansion of the production capacity of the company's leading products, the further high-end of the overall production capacity structure, and the rapid launch of new products are conducive to the promotion of the core competitive position in the market.

Layout PET composite copper foil cutting-edge products, cut into the field of lithium battery current collector, enhance the growth of the company. At present, the market pays more attention to PET composite copper foil. PET composite copper foil can improve the safety and energy density of lithium battery, which is on the eve of scale and industrialization. With the improvement of quality product rate and continuous iteration of equipment technology, it is expected that its manufacturing cost can be reduced to less than 3 yuan / square meter. Compared with traditional lithium copper foil, it has a good competitive advantage.

We estimate that the market space of PET composite copper foil in China will reach about 29 billion yuan in 2025. The company's PET composite copper foil has the advantage of self-production of the base film, and the production of the whole chain is open, we estimate that the production cost of the PET composite copper foil is about 3.5yuan / flat, and the company has realized the production of the whole chain. We believe that the material side of the company has advantages, works closely with equipment-side enterprises, actively promotes the progress of test development, and is expected to become the core player in the field of composite copper foil.

High R & D investment and capacity advantages help the company to secure its leading position. The company continues to strengthen product research and development in the field of new materials, 2022H1 R & D investment of 125 million yuan, + 13% compared with the same period last year. The company completed the construction of 10,000-ton nano-masterbatch, laid a solid foundation for the volume of high-end products, promoted the R & D and testing of new materials such as weathering PET substrate for photovoltaic and PET composite copper foil for lithium battery, followed the iterative path of technology in the field of new energy, and led the development of BOPET thin film industry. The company has an existing production capacity of more than 1 million tons, ranking first in the industry, with significant scale advantages. With the continuous release of the construction capacity and the further increase in the production capacity of high-end new materials, we believe that the company will rely on its own R & D strength and capacity scale advantages to stabilize its leading position and be optimistic about the company's future development space.

Risk factors: the risk of sharp macroeconomic fluctuations; the risk of intensified competition in the industry; the risk of price fluctuations of major raw materials; the construction progress of the company's new capacity is lower than expected; the company's new capacity is not as expected; the technical indicators of the company's products are not as expected; the risk of brain drain.

Investment suggestion: double Star New Materials is a leading enterprise of BOPET film in China, with a production capacity of more than one million tons of BOPET, optical, photovoltaic, information materials and other leading products continue to develop, and the gross profit of new materials accounts for more than 85%. The company relies on scale and technical advantages, layout PET composite copper foil, significant cost advantages, aiming at the battery current collector broad market, and further expand the growth space. We estimate that the return net profit of the company from 2022 to 2024 is 17.94,24.91 and 3.182 billion yuan respectively, and the corresponding EPS forecasts are 1.55,2.15,2.75 yuan respectively. With reference to the valuation level of the comparable company (Yuxing, Changyang Technology, Stick, Dongliang Technology, Chi Chi Technology), combined with the valuation methods of PE, PEG and EV/EBITDA, the company is given a target price of 30 yuan, corresponding to 19 times PE in 2022, covering for the first time and giving a "buy" rating.