The current situation of the company

The company announced that it plans to sign a strategic cooperation agreement on solar cell packaging film with a new energy technology (Quzhou) Co., Ltd. (referred to as a new energy). In 2023, a new energy company plans to purchase a total of 2400 million square meters of photovoltaic film from the company.

We believe that the company's photovoltaic film products are outstanding, with continuous breakthroughs in production and continuous acquisition of high-quality new customers, the company's photovoltaic film business is expected to grow rapidly in the future.

Comment

1. In 2023, the company expects to supply a new energy POE, EPE photovoltaic film with a total of 2400 square meters, and continue to obtain high-quality new customers. According to the announcement, in 2023, a new energy company is expected to purchase from Kunshan Tianyang, a wholly owned subsidiary of the company, no less than the pure POE film required by the company's wholly-owned subsidiary Kunshan Tianyang, and the double glass film required by the 2.2GW module (EVA with co-extruded POE); the corresponding annual purchase of pure POE film is about 3.6 million square meters, and the combination of double glass film is not less than 2040 square meters, totaling about 2400 square meters (allowed by both sides ±20%), equivalent to 90.6% of the company's total photovoltaic film sales in 2021. We believe that this strategic cooperation represents the recognition of the company's POE, EPE and other photovoltaic film products by high-quality customers.

2. The company's photovoltaic film business products are outstanding, and the rapid expansion of production capacity and abundant on-hand orders are expected to help it rise rapidly and become the first echelon in the industry. We believe that: 1) the product power of the company's photovoltaic film has been widely recognized by downstream component customers, and with the continuous improvement of the company's overall manufacturing capacity, its photovoltaic film unit labor and manufacturing costs have also approached the industry-leading level. 2) at present, the company has formed an annual production capacity of about 128 million square meters of photovoltaic film, and is expected to increase to about 160 million square meters of annual production capacity by the end of this year. We expect that if the company's non-public offering shares are successfully approved, annual production capacity is expected to increase to 510 million square meters in 2024, contributing to rapid growth in the next three years. We are firmly optimistic about the growth potential of the company's photovoltaic film business. on the one hand, its share of existing customers such as Zhengtai and Oriental Risheng is expected to continue to increase; on the other hand, we will actively expand the top five customers in the industry and a new energy source and other high-quality new customers. to help its photovoltaic film business continue to rise rapidly, we expect the company to have plenty of orders in hand in the second half of this year and next year.

3, reiterate Top Pick, optimistic about the growth prospect of the company's photovoltaic film and wall cloth business. 1) Photovoltaic film: we expect that the silicon supply is expected to be gradually released from September, leading to the continuous improvement of the operating rate of the industrial chain and downstream demand, and the superposition of the company's production capacity. in the future, the company's photovoltaic film business is expected to continue to grow rapidly; 2) Wall cloth: the company's own brand "Tianyang wall cloth" product strength is leading, and it is expected to continue to improve the product and channel layout in the future, and continue to expand market share.

Profit forecast and valuation

The earnings forecast for 2022Universe 2023 will remain unchanged, and the current share price will correspond to the current stock price of 42pm in 2023 and 18x Pamp E in 2023, while the industry rating and target price will be maintained at RMB 18, corresponding to 24x Pamp E in 2023, which is 35% higher than the current stock price.

Risk

Terminal demand is lower than expected; new capacity is less than expected; raw material price fluctuation; cash flow risk