Incident: On April 28, the company released its 2022 annual report and 2023 quarterly report. In 2022, the company achieved operating income of 5.31 billion yuan, +70.9% year on year; net profit of 0.5 billion yuan, -80.1% year on year; gross profit margin of 7.9%, -7.2 pct year on year. 2022Q4's revenue was 1.17 billion yuan, +6.4%/-10.9%; net profit of the mother was -80 million yuan, -163.2% year on year; gross profit margin was 2.9%, -17.3/+4.2pct. The company's profit declined in 2022 due to factors such as a sharp drop in raw material prices and increased financial expenses. 2023Q1 achieved revenue of 1.35 billion yuan, +10.0%/+15.0% month-on-month; net profit of 0.2 billion yuan, -70.6% year on year; gross profit margin was 6.3%, -6.3/+3.3pct month-on-month; profitability improved month-on-month.

Film profit was under pressure in '22, and quantitative profit will rise sharply in '23: in 2022, the company shipped 435 million square meters of photovoltaic film, +76.9% year on year. The single flat price (excluding tax) was 12.1 yuan, -2.6% year on year, and the net profit per sheet was about 0.1 yuan, -0.9 yuan year on year; raw material prices fell sharply in the second half of 2022, and film prices fell accordingly. Affected by high-priced particle inventories, the company's film profit level declined. It is estimated that in 2023Q1, the company shipped more than 150 million square meters of adhesive film, +40%-50% over the same period last year. The price of a single flat was about 8.5 yuan, and the net profit of a single flat was about 0.15 yuan. The profit level increased month-on-month. Looking ahead to 2023 as a whole, the company's effective production capacity is expected to reach more than 900 million square meters, and annual shipments are expected to exceed 800 million square meters.

At the same time, it is expected that there may be phased particle tension in the second half of the year, leading to an increase in film prices. The volume of N-type batteries will optimize the company's shipping structure, and film profit levels will continue to be repaired.

Continued investment in R&D and innovation has made progress in the field of new energy vehicles: in the field of photovoltaic film, the company added products such as single-layer POE film and new EXP film for TOPCON in 2022. A breakthrough was achieved in HJT special phototransfer film research and development, and the company's photovoltaic film technology continues to lead and is rich in variety. In the non-photovoltaic field, the company added electronic functional films such as dimming films for smart glass of new energy vehicles, and new products such as PVE glass adhesive films for cooling and noise reduction. At the same time, new environmentally friendly surface materials for smart cockpits of automobiles have also made good progress. The expansion of the non-photovoltaic field is expected to open up room for the company's growth in the future.

Investment advice: Under the trend of intensifying competition in the adhesive film industry, we lowered the company's profit forecasts for 2023 and 2024. The company's net profit for 2023-2025 is estimated to be 530 million yuan, 81 billion yuan, and 93 billion yuan respectively. The corresponding PE is 19.3, 12.8, and 11.1 times, maintaining the “buy-A” investment rating.

Risk warning: PV installation falls short of expectations; film prices have dropped sharply; raw material costs have risen sharply, etc.