Incident: The company released its 2022 report and 23Q1 quarterly report. It achieved revenue of 1.88 billion yuan during the 22-year reporting period, -5.4% year-on-year, net profit of 170 million yuan compared to the previous year, -19.9% year-on-year, net profit of 140 million yuan, -18.0% year-on-year; of which 22Q4 single-quarter revenue was 260 million yuan, -51.7% year-on-year, -55.7% year-on-month, minus unattributed net profit -7547 million yuan, -110.5% year-on-year, -110.7% year-on-month. 23Q1 achieved revenue of 4.8 billion yuan, +0.9% year on year; attributable net profit of 20.02 million yuan, +13.8% year on year; after deducting unattributed net profit of 1,5066 million yuan, +13.4% year on year.
The dark hour of 22Q4 has passed, and 23Q1 has returned to the growth channel. The company's 22Q4 operation was affected by multiple factors, and revenue performance declined significantly from the same month to month. We determined that production line shutdowns and logistics interruptions at the end of the year were caused by the epidemic infection as the main reason. The company's production base is concentrated in Sihong, Jiangsu, and most of them are dust-free workshops. If one person is infected, the production line will be shut down. Therefore, it is determined that the impact of the epidemic infection on its production and operation is more significant and long-lasting. The company's revenue returned to the growth channel in 22Q1, but since the consumer electronics recovery is still not obvious, we expect the Q2 recovery to accelerate.
Looking at each segment, e-adhesive revenue was strong in '22, and functional films and film packaging materials declined quite seriously.
The company's electronic adhesive materials revenue in '22 was 840 million, +26.4% over the same period last year. It was determined that domestic substitution revenue for OCA glue contributed greatly, partly hedging the impact of the decline in consumer electronics demand and the discontinuation of production during the Q4 pandemic. Functional films and film packaging materials achieved revenue of 47/45 million yuan respectively, -14.4%/-20.5% year-on-year. Comparing the growth rate of the two mid-term revenue reports of -29.1%/3.9%, we determined that the decline in functional films (including traditional materials for consumer electronics) may be related to poor demand for consumer electronics; the decline in film packaging was mainly in H2, due to its relatively low gross margin, and it is speculated that priority was given to securing the operation of high-margin electronic adhesive production lines during the year-end infection period, which led to more discontinuation of production of packaging materials production lines.
Operating cash flow is tight and is expected to improve in the future as growth returns to track. As of 23Q1, the company's net operating cash flow was -80 million yuan, with a revenue ratio of 70.8%, and -9.1pp/-10.8pp respectively over the same period. Judging that it may be related to the sharp decline in 22Q4 revenue and the increase in expense rates. In the future, as revenue returns to the growth path and repayment control improves, the company's cash flow situation is expected to improve.
In terms of profitability, electronic adhesive materials have maintained high gross profit margins, while functional film materials have declined. The company's overall gross profit margin for the full year of 22 was 29.7%, which remained stable over the previous year; among them, the gross profit margin of electronic grade adhesive materials was 47.5%, maintaining a high gross margin level. Judging that it was related to the contribution of high-end replacement of OCA glue, the gross profit ratio of functional film materials was 19.5%, compared to -2.6pp. The judgment was that competition for new energy-related materials was fierce, which was related to lower overall gross margin. In 23Q1, the company's gross profit margin was 24.9%, -1.4pp compared to the previous year. Considering that the company upgraded 6 OCA release film production lines last year, we determine whether the increase in depreciation in Q1 was the main reason for the decline in gross margin.
Profit forecasts and investment recommendations. The company is a leading consumer electronics film material company. OCA glue is being replaced domestically, and the lithium battery material distribution logic remains the same. We are optimistic that the company's revenue performance will return to a high growth channel after surviving the unexpected impact of the epidemic. Based on this, we lowered the company's revenue forecast for 2023-2025 to 25.5/35.470 billion yuan, the net profit forecast to 3.5/51/730 million yuan, and the corresponding EPS was 1.07/1.57/2.25 yuan respectively. The net profit of Homo will maintain a compound growth rate of 63.0% in the next three years. The corresponding PE is 21x/14x/10x, giving the company a fixed valuation premium of 30 times PE for 2023. The corresponding market value is 10.04 billion yuan, the target price is 32.1 yuan, maintaining the “buy” rating .
Risk warning: Risks such as rising raw material prices, projects under construction falling short of expectations, and downstream demand falling short of expectations.