Computing power drives the demand for high-end packaging materials, and a number of product verification has made key progress: the computing pressure brought by the landing of AI technology drives the release of high-end packaging demand, which in turn drives the market of high-end packaging materials. On the one hand, Moore's law is gradually moving towards the limit, so that advanced packaging technology is valued by the market, and the demand for related packaging materials, including DAF film, is also gradually released; on the other hand, the high power consumption of the big computing chip further enhances the heat dissipation pressure, which promotes the release of TIM adhesive and Adhesion adhesive demand, in order to protect the solder ball, it also drives the demand of Underfill bottom filling adhesive. A number of the company's products have made key progress in downstream verification, and some products have been supplied on a small scale, and the second half of the year is expected to gradually enter the order release stage.

The production and sales of new energy vehicles continued to grow, and power battery projects were further realized: in the first half of 2023, China produced 3.788 million new energy vehicles and sold 3.747 million vehicles, an increase of 42.4% and 44.1% respectively over the same period last year. The production capacity of 8800 tons of power battery packaging materials in the company's IPO fundraising project has been put into production and is expected to continue to benefit from strong downstream demand.

Equity incentive shows confidence: the company recently released a 2023 equity incentive plan (draft), which intends to grant 2.68 million restricted shares to the incentive target, accounting for about 1.88% of the company's total equity at the time of the announcement of the draft incentive plan. The incentive program includes 9 directors, supervisors, senior managers and core technical personnel, as well as 100 other core backbone personnel, middle managers and other personnel that the board of directors of the company deems necessary to encourage. According to the performance evaluation target set out in the draft, in order to achieve the 100% ownership of restricted shares granted under this incentive plan, the company's revenue in 2023-2025 needs to grow by no less than 30%, 62.5% and 95% compared with 2022, respectively. It shows the company's confidence in future performance growth.

Investment suggestion: the company's new energy Applied Materials Inc is expected to maintain rapid growth in 2023, and the products in the field of IC and smart terminals are expected to gradually expand after that. From 2023 to 2025, the company is expected to achieve operating income of 12.52,16.31 and 2.122 billion yuan respectively, and realize net profit of 1.74,2.67 and 394 million yuan respectively, corresponding to EPS of 1.22,1.88,2.77 yuan respectively. Maintain a "buy" rating.

Risk tips: technology research and development is not as expected, downstream demand expansion is not as expected, and market competition is intensified.