Incidents: In 2022, the company achieved revenue of 1.74 billion yuan, an increase of 35.1% over the previous year; achieved net profit of 110 million yuan, a decrease of 14.7% over the previous year; net profit of the non-return mother was 96 million yuan, an increase of 1.8% over the previous year. In 2023Q1, the company achieved revenue of 400 million yuan, an increase of 4.7% over the previous year; it achieved net profit of 19 million yuan to the mother, a decrease of 41.84% over the previous year.

The share of BO increased to 80%, and production capacity expanded rapidly to meet market demand. In 2022, the company actively promoted BO backplane products and received batch orders from strategic customers such as Jingao, Longji, Tongwei, China Energy Saving, and Dongfang Risheng. The BO-type backboard shipped 81.18 million square meters, accounting for 78.3% of the total annual backboard shipment volume of 103.7 million square meters. The company's BO-type backplane revenue was 773 million yuan, accounting for 70.7% of the total revenue of the backboard. At present, the company's BO backboard shipments account for more than 90%, which will further increase the company's net profit level. The company currently has a backboard production capacity of 114 million square meters, which is already full. It will add 100 million square meters of production capacity in the future. It is expected that it will be digested smoothly, and production will double.

The adhesive film business is developing rapidly, and membrane technology epitaxial products are abundant. In 2022, the company has formed an annual production capacity of 100 million square meters of adhesive film and has shipped in batches. The main film products include POE film, EPE film, and EVA film. A total of 23.29 million square meters of adhesive film were sold, an increase of 163% over the previous year. Among them, POE/EPE film shipments accounted for 28%, and EVA film shipments accounted for 72%, achieving revenue of 275 million yuan. The company's IPO raised 120 million square meters of production capacity and Vietnam's Ming Guan's production capacity of 100 million square meters gradually reached production. Production capacity will reach 220 million square meters by the end of the year, which will be another growth point for the company's performance. In addition, the company also has a number of promising new technologies, including heterogeneous mesh barriers, which are expected to blossom more in the future.

The localization of aluminum-plastic film was completed, and the slowdown in downstream demand affected volume. In 2022, the company has implemented the introduction or independent production of domestic raw materials such as aluminum foil, adhesives, nylon, PET, CPP, etc. While ensuring the stable quality of aluminum-plastic film products, the supply chain of aluminum-plastic film raw materials has been stabilized, which has also reduced product production costs.

In 2022, the company sold and shipped 7.16 million square meters, an increase of 22% over the previous year; it achieved aluminum-plastic film revenue of 109 million yuan, an increase of 12.22% over the previous year. The company's power/energy storage battery aluminum-plastic film sales accounted for 79%, and 3C digital battery aluminum-plastic film sales accounted for 21%.

The steady increase is about to successfully complete the major expansion of production, and 500 million square meters of production capacity will soon be invested in the construction of the new Hefei base. In September 2022, the company raised a fixed increase of 1.68 billion yuan to invest in the Mingguan lithium film construction project with an annual output of 200 million square meters of aluminum-plastic film and the construction project of Jiaming Film Company with an annual output of 100 million square meters of fluorine-free backplate. In February of this year, the company signed a cooperation agreement with Feidong County in Hefei City to invest in the construction of a solar backpanel with an annual output of 300 million square meters and a functional membrane project of 200 million square meters. These projects will be invested and constructed one after another, and the company's production capacity will increase by about 3 times when all are implemented.

Profit forecasts and investment recommendations. The expansion of the company's backplate and adhesive film production capacity will accelerate in the future, and profitability is expected to be restored.

We expect the company's net profit to be 406/806/956 million yuan in 2023/2024/2025, maintaining the “buy” rating.

Risk warning: Risks such as the contraction of the single-sided module market, the iteration of lithium battery technology, and the fixed increase in new production capacity falling short of expectations.