Incident: The company released its 2022 annual report on March 14. The company achieved revenue of 1,040 million yuan for the full year of 2022, an increase of 4.04% over the previous year; achieved net profit of 74 million yuan, an increase of 45.41% over the previous year; and realized net profit of 65 million yuan after deducting non-net profit of 65 million yuan, an increase of 43.58% over the previous year. On a quarterly basis, the company achieved revenue of 258 million yuan in Q4 2022, an increase of 0.33% over the previous year, a decrease of 2.25% over the previous year; realized net profit of 21 million yuan, an increase of 21.22% over the previous year, an increase of 63.73% over the previous year; and achieved net profit of 19 million yuan after deduction of the non-return mother, an increase of 42.87% over the previous year, an increase of 79.36% over the previous year.

Benefiting from the continued boom in new energy, profitability increased dramatically: throughout 2022, the company achieved a net profit attributable to parent company owners up 23 million yuan compared to 2021, and its performance grew rapidly. The company's gross margin for the full year of 2022 was 26.04%, +5.61 pcts year on year; the company's net interest rate for the full year was 7.86%, +2.83 pcts year on year. The company's profitability increased dramatically in 2022. The main reason is: in 2022, the domestic new energy market continued to boom, demand for polypropylene film, the company's leading product, increased, and sales prices rose year-on-year. At the same time, the company actively carried out product restructuring and strengthened internal management. Gross margin increased compared to the same period last year, and product profitability increased. In terms of expenses, the company's sales, management, R&D and financial expenses rates for the full year of 2022 were 3.40%/8.08%/4.27%/-0.39%, respectively. The year-on-year changes were 0.45/2.04/0.66/-1.51 pcts, respectively.

Increase and expand the production of new energy film materials and continue to increase the layout of emerging markets: the company's main business is the R&D, production and sales of thin-film capacitors and their thin-film materials. The products are widely used in various industries such as home appliances, communications, power grids, rail transit, industrial control and new energy (photovoltaics, wind energy, automobiles). On August 30, 2022, the company issued a fixed increase plan to raise capital to build an ultra-thin film material project for new energy to introduce 2 ultra-thin film production lines to form a complete production system for ultra-thin film materials for new energy, expand product production capacity, continue to promote the development of film products in the direction of ultra-thin film products, high temperature resistance and high pressure resistance, meet market opportunities brought about by the development of the new energy industry, and further enhance the company's overall competitiveness and profitability.

Continuing to benefit from the growth of emerging markets, the thin-film capacitor industry is gaining momentum: New energy vehicles, photovoltaics, wind power, etc. are key markets for the company's future layout and the main incremental market for the company's products. According to statistics from the China Automobile Association, domestic NEV sales reached 6.887 million units in 2022, an increase of 93% over the previous year; according to data from the National Energy Administration, the number of new domestic PV installations reached 87.41 GW in 2022, an increase of 60.3% over the previous year, and the domestic NEV industry continues to be booming. Furthermore, according to external data released by the Information Office of the State Council, in 2022, China's electric vehicle exports increased 131.8% year on year, and exports of photovoltaic products increased 67.8% year on year. Strong demand in the new energy sector at home and abroad will inevitably drive the expansion of the company's thin-film capacitor business and inject greater momentum into the company's profit growth.

First coverage, giving a “buy” rating: The company is mainly engaged in R&D and sales of thin-film capacitors and their thin-film materials. Because of their characteristics such as high rated voltage, long life cycle, and non-polarity, the application of thin film capacitors is rapidly expanding into new demand fields such as renewable energy (photovoltaics, wind power) and new energy vehicles. As carbon standards and carbon neutrality targets are proposed, demand for thin-film capacitors in the photovoltaic and wind power fields will grow rapidly; the gradual replacement of traditional fuel vehicles by new energy vehicles is also being vigorously promoted by various governments, and there is plenty of market space in the future. Benefiting from the steady development of downstream traditional industries and the rapid growth of emerging industries, the size of the thin-film capacitor market will gradually expand. The company's net profit for 2023-2025 is estimated to be 118 million yuan, 165 million yuan and 191 million yuan respectively; EPS is 0.21 yuan, 0.29 yuan, and 0.34 yuan respectively; PE is 34X, 24X, and 21X respectively.

Risk warning: risk of increased market competition, risk of fluctuations in raw material prices, risk of implementation of investment projects, risk of macroeconomic fluctuations and policy changes.