Event: Wanshun Xincai disclosed that the company achieved operating income of 4.281 billion yuan in the first three quarters of 2022, up 5.08% from the same period last year, of which Q3 achieved revenue of 1.499 billion yuan, up 23.72% from the same period last year and 3.73% month-on-month growth. In the first three quarters of 2022, the company realized a net profit of 163 million yuan, an increase of 631.68% over the same period last year, of which Q3 reached 42 million yuan in a single quarter, an increase of 941.16% over the same period last year, down 36.51% from a month earlier. In the first three quarters of 2022, the net profit after deducting non-recurring gains and losses was 158 million yuan, an increase of 867.28 percent over the same period last year. Among them, Q3's net profit after deducting non-recurring gains and losses in the first three quarters was 42 million yuan, an increase of 1714.65 percent over the same period last year and a decrease of 35.16 percent from the previous quarter.

Aluminum price fluctuations, domestic and foreign aluminum prices affect Q3 gross profit. The gross profit of 2022Q3 was 180 million yuan, down 6.3% from the previous month. 1) sales volume: shipments of Q3 aluminum foil increased by 4.3% month-on-month. In the first three quarters of 2022, the company sold 75600 tons of aluminum foil, 20800 tons of battery aluminum foil and 54800 tons of double zero foil. 2022Q3 Anhui Zhongji, which mainly produces aluminum foil for batteries, sold 8300 tons of aluminum foil, up 1000 tons from the previous month, or 13.7% from the previous month. 2022Q3 Jiangsu Zhongji (which mainly produces double zero foil) sold 18200 tons of aluminum foil, an increase of 0.6 per cent compared with the previous month. 2) Aluminum price affects gross profit: the company's export double zero foil products adopt the "LME aluminum price + processing fee" model, while the Q3 Lun Shanghai aluminum price is upside down, resulting in damage to export profits. At present, Shanghai / London ratio has become a regular employee. In addition, Q3 domestic aluminum prices are down, and the company's inventory is under pressure. In view of aluminum price fluctuations, on the one hand, the company maintains reasonable inventory, broadens raw material channels, and gives full play to the bargaining power of group platform centralized procurement; on the other hand, timely and appropriate amount of foreign exchange hedging business and other measures.

The production capacity of the high barrier diaphragm material production base project began to release. The production base of high resistance diaphragm material was put into production at the end of 2021 and is expected to reach production by 2024. The high-resistance diaphragm production base plans 6 million square meters of high-resistance diaphragm materials for new display components in the optoelectronic field and 1200 tons of high-resistance diaphragm materials for food and pharmaceutical packaging. At present, the high resistance diaphragm developed by the company for portable photovoltaic products has begun to supply downstream photovoltaic panel manufacturers. In addition, in order to meet the packaging material requirements of the global green low-carbon cycle development trend, the company has developed a recyclable single material (PP), cooking-resistant transparent high-resistance diaphragm also began to supply customers.

Aluminum foil faucet set out again, vertically integrated layout of battery aluminum foil field. The company has been deeply engaged in the industry for many years and has formed an aluminum processing industry chain from aluminum strip (aluminum foil billet) to aluminum foil and then to carbon-coated foil vertically through mergers and acquisitions and capital increase. 1) Aluminum strip: the company speeds up the distribution of upstream raw materials, invests 1.1922 billion yuan to set up Sichuan Wanshun Zhongji Aluminum Co., Ltd., and plans 130000 tons of aluminum strip project (including 80,000 tons of battery aluminum foil billet) to further reduce costs. 2) Battery Aluminum foil: the company is currently producing 40,000 tons of battery aluminum foil, and the second phase of the 32000-ton project has been launched. Customers downstream of battery positive foil include Ningde Times, Ningde Bofa, Polyfluoro, Xin Wanda, excellent foil talents, Huzhou Tianfeng and so on. In January 2022, the company announced that it planned to raise no more than 1.7 billion yuan to build 100000 tons of aluminum foil for power and energy storage batteries. 3) carbon-coated aluminum foil: in order to improve the added value of battery aluminum foil, the company acquired Shenzhen Yuqiang in April this year, laying out the field of deep processing of battery aluminum foil. At present, Shenzhen Yuqiang has a production capacity of 3700 tons and has begun to prepare for the construction of a 50, 000-ton project, of which 25000 tons in the first phase is expected to be put into production in 2023.

Profit forecast and investment advice: taking into account the impact of aluminum prices on Q3 performance in 2022 and the volume of carbon-coated aluminum foil in 2024, we estimate that the company's net profit in 2022, 2023, and 2024, respectively, is RMB 2.31 million (the previous value is 278,3.75 and 450 million yuan), corresponding to a PE of 32x20x14X in 2022-2024, maintaining the company's "buy" rating.

Risk prompt events: price fluctuation of main products, fluctuation of raw material cost, change of industrial policy, project progress not as expected, the risk of decreasing processing fees caused by increased market competition, and the risk of lagging behind in the use of public information.