Event: on April 28, the company released its annual report of 2022 and quarterly report of 2023. In 2022, the company achieved a total revenue of 5.307 billion yuan, an increase of 70.9% over the same period last year, a net profit of 50 million yuan, a decrease of 80.14% over the same period last year, and a deduction of 28 million yuan for non-net profit, down 88.34% from the same period last year. In the first quarter of 2023, revenue totaled 1.351 billion yuan, an increase of 9.98 percent over the same period last year, net profit of 23 million yuan, down 70.56 percent, and non-return net profit of 24 million yuan, down 69.44 percent from the same period last year.

The market share is growing rapidly and the momentum of production expansion is strong. Photovoltaic installation continues to be a high boom, the company's photovoltaic film production and sales are prosperous, shipping revenue has maintained rapid growth. In 2022, the company's revenue of photovoltaic film products reached 5.258 billion yuan, an increase of 72.28% over the same period last year; sales reached 435 million flat, an increase of 76.88% over the same period last year, and the market share continued to increase. In June 22, the company issued convertible bonds to build Yancheng photovoltaic packaging film project with an annual output of 200 million square meters (phase I) and Shangrao annual production of 150 million square meters of photovoltaic packaging materials (phase I). 23Q1 intends to raise funds to build Zhenjiang 200 million square meters photovoltaic packaging material production project (phase I) and Shangrao annual production project (phase I). With the gradual expansion of new production capacity, the company's shipping capacity will be further improved and its leading position will be stable.

Film profits hit bottom and rebound, product structure optimization welcome N-type volume. In 2022, the company's gross profit margin was 7.87%, a year-on-year decline of 7.49pct, which was at an all-time low, mainly due to sharp fluctuations in the price of EVA particles, the company hoarded goods at a high price in the previous period, while the price of 22Q4 particles fell sharply, resulting in a mismatch between high inventory costs and low prices, loss in the film business, and temporary pressure on performance. The influence of 23Q1 high-price inventory weakens after digestion, and the price of plastic film picks up. We estimate that the net profit per unit is about 0.15 yuan, and the comprehensive gross profit margin of the company rises to 6.26%. The price of silicon material goes down, the increase of production of downstream components drives the demand for auxiliary materials, and the profit of film is expected to be further repaired. The iterative trend of N-type battery technology is remarkable, and the company actively optimizes the product structure, taking the lead in launching new TOPCon-specific EXP film and improved EPE film, and the new production capacity is mainly concentrated in the film used in double glass modules and N-type battery modules that can achieve high profitability, which is expected to fully enjoy N-type dividends and drive profits to thicken.

POE takes the lead in ensuring supply and expanding the field of new energy vehicles. The company has actively explored the non-photovoltaic field and successfully developed new products such as dimming film for intelligent glass of new energy vehicles, PVE glass adhesive film for reducing temperature and noise, and new environmentally friendly surface materials for automobile intelligent cockpit have also made good progress. The company signed a memorandum of cooperation on POE resin development and POE product supply with Dow China on April 25 to promote the growth of POE in the automotive intelligent cockpit surface materials market. The deep cooperation between the two sides may help to enhance the supply capacity of photovoltaic-grade POE particles, increase shipments of POE films, and develop photovoltaic and non-photovoltaic businesses simultaneously.

Investment suggestion: the company is expected to achieve revenue of 9.033 billion yuan, 13.126 billion yuan and 16.487 billion yuan respectively from 2023 to 2025, and realize net profit of 522 million yuan, 867 million yuan and 1.052 billion yuan respectively, an increase of 942%, 66.2% and 21.3% over the same period last year. The corresponding EPS is 6.21,10.32,12.52 respectively, and the corresponding PE multiple of the current stock price is 19.7X, 11.9X and 9.8X respectively, maintaining the "buy" rating.

Risk tips: capacity expansion is not as expected; industry competition is intensified; downstream demand is not as expected; raw material price fluctuation risk and so on.