Electromagnetic shielding film business has bottomed out and rebounded; market share is expected to continue to rise: due to global inflation and geopolitical conflicts, we expect global mobile phone shipments to decline by about 8% in 2022, resulting in a 17% year-on-year decline in the company's 1H22 electromagnetic shielding film business. With overseas inflation under control, consumer confidence is expected to pick up and mobile phone inventory is coming to an end, we expect global smartphone shipments to grow by 2.4% year-on-year in 2023, which will lead to the recovery of electromagnetic shielding film business. At the same time, the company is also expected to break through major customers, according to our estimates, the customer's global mobile phone electromagnetic shielding film demand accounted for 46% in 2022.

Peelable copper breaks the monopoly of overseas manufacturers; copper foil business is growing rapidly: according to our estimates, the market space for peelable copper on board is about 2 billion yuan. At the same time, the peelable copper is expected to infiltrate from the class carrier board to the IC carrier board in the future, and it will be applied on the BT/ABF carrier board, while the market space of the BT/ABF carrier board is four times that of the class carrier board. We expect that there may be an IC carrier board with copper strippability to start shipping in 2H23. At present, the company's products continue to promote customer certification, which is expected to break the monopoly of Japanese Mitsui copper foil in this field. In addition to peelable copper, the company's standard copper foil / RTF/HVLP copper foil will also continue to increase, and we expect the company's copper foil business revenue of 290 million / 460 million in 2023 / 2024, which will become the second growth point. On the other hand, the company has also laid out PET composite copper foil, which has a market space of more than 10 billion RMB in 2025. With the company's process accumulation in sputtering and copper plating as well as the cost advantage of equipment, composite copper foil is expected to become the long-term growth momentum of the company.

FCCL business synergy is significant; extremely thin products help domestic substitution: the company layout FCCL business can use self-produced standard copper foil, without external mining, is an important "sea outlet" of its copper foil business. At the same time, the advantages of the company's FCCL business are as follows: 1) the process technology and equipment of FCCL can be reused with electromagnetic shielding film; 2) FCCL and electromagnetic shielding film belong to the upstream of FPC, and customer resources can be reused; on the other hand, according to our calculations, the ultra-thin FCCL market space for high-end products is more than 800 million US dollars, and the domestic alternative space is large. We expect the company's FCCL business revenue to grow rapidly, accounting for 4% of the company's revenue in 2023 and 12% in 2024.

Valuation and recommendations: we predict that the company's annual revenue in 23-24-25 will be 530 million / 9.6 / 1.42 billion, an increase of 67%, 79%, 48% and a net profit of 13 million / 201 million yuan. As the growth rate of the company's performance (2023-2025 418% CAGR) is much higher than that of the same industry and the follow-up momentum is still strong, the company is given 20x 2025 PE with a discount of 9.5% WACC corresponding to 74 yuan (corresponding to 29.5x 2024PE), with a "better than the market" rating for the first time.

Risks: 1) new product promotion is not as expected; 2) competition intensifies; 3) copper prices continue to rise and impact profitability; 4) capacity release is not as expected.