Incident: The company released its 2023 annual report. 2023H1 achieved revenue of 172 million yuan, +0.31% year on year, realized net profit of 44 million yuan, +5.69% year on year, minus non-net profit of 52 million yuan, +37.80% year on year, gross profit margin 25.62%, and -0.66 pcts year on year. In the 23Q2 quarter, the company achieved revenue of 96 million yuan, +27.16%, +25.46%, year-on-year, net profit of -22 million yuan, +11.77% /month-on-month +0.31%, net profit minus non-net profit -225 million yuan, +13.62% YoY /-8.91%, gross profit margin 25.05%, year-on-year -3.22pcs/-1.30pcts.
The copper foil+shielding film business is affected by downstream demand and is under pressure: 23H1 is affected by the overall supply and demand of the electronic copper foil industry. The sales price of standard electronic copper foil products (mainly processing costs) has declined further. Combined, the company's copper foil production costs are high, resulting in a year-on-year decline in copper foil business profits. The shielding film was affected by the decline in demand for smartphones. Although sales of high-end products increased dramatically, overall sales volume declined year on year, the price of ordinary shielding film fell, and gross profit of the shielding film business fell by 18.96 million yuan year on year. With the production and R&D base of the company headquarters and the production and R&D base of Dachuang in Zhuhai put into use, depreciation of fixed assets increased year-on-year, which also dragged down profits. Currently, industry demand is at the bottom, and the company's performance is under pressure. Looking forward to the future, as the overall macroeconomic trend improves, downstream demand such as shielding film and copper foil is expected to improve, and the company's revenue and profitability are expected to continue to recover.
Downstream demand for shielding films is broad: 23H1 shielding film business achieved revenue of 8.56 million yuan, -13.33% year-on-year, gross profit margin of 51.35%, year-on-year -11.06 pct. Overall sales and profitability declined year-on-year due to sluggish demand for smartphones. Currently, the company's products have been widely used in well-known terminal brands such as Huawei, Xiaomi, OPPO, vivo, and Samsung. In the future, as consumer electronics products are “lightweight and short” and high-frequency high-speed demand becomes more prominent, the trend of intelligent new energy vehicles is becoming more and more popular, and the market space for electromagnetic shielding films is expected to further open up. The company's high-performance, customized electromagnetic shielding film has entered the mass production stage and continues to be iteratively upgraded. It is expected to grasp industry trends and grow along with downstream demand.
Peelable copper foil has received small orders: Currently, the company's copper foil products are mainly standard electronic copper foil (transitional product). 23H1 achieved revenue of 86.63 million yuan, +22.07% year-on-year, and a gross profit margin of 0.36%, which was positive year-on-year. In the field of high-end peelable ultra-thin copper foil for chip packaging, currently Japan's Mitsui Metals still has a monopoly, and there is a serious neck problem. The company's peelable ultra-thin copper foil is currently undergoing customer certification, and sample delivery quality is stable. A wide format product has passed physical properties and process tests by some carrier board manufacturers, passed the first round of verification of some terminals, and has already obtained small orders, which is expected to help achieve domestic replacement of chip packaging materials in China.
FCCL: Prepare the base material for flexible circuit boards (FPC). Currently, small-lot mass production work is being carried out. Regular FCCL implements small orders during the reporting period. The ultra-thin FCCL is currently still in the customer testing and certification phase.
PET copper foil: Samples have been sent to some downstream customers.
Resistance film: Applied to smartphone acoustic components, it is currently in the customer certification stage. Some products have passed basic physical properties and process tests and batch stability tests by relevant customers, and terminal certification is ongoing.
Investment suggestions: As a high-end electronic materials platform company, the company's performance is currently under pressure due to its own transformation and slump in industry demand. In the future, with the improvement in consumer electronics demand, the company's high-end new materials will be shipped in batches, and overall profit is expected to improve. We expect the company's net profit to be -0.66/0.54/103 million yuan in 23/24/25, EPS is -0.82/0.67/1.29 yuan/share, and the corresponding PE multiplier is -/65.16/34.07 times, maintaining the “increase in holdings” rating.
Risk warning: There is a risk of further decline in demand for shielding films; industrialization of high-end materials such as strippable copper falls short of expectations; risk of rising raw material prices.