Incident: On August 25, 2023, the company released its semi-annual report for 2023, achieving revenue of 978 million yuan, -5.08% year on year; net profit of 65 million yuan, -29.04% year on year; net profit after deducting non-net profit of 51 million yuan, or -36.56% year on year. Among them, Q2 achieved revenue of 495 million yuan in a single quarter, -10.33% year on year, +2.55% month on month; net profit of 44 million yuan, -39.42% year on year, +119.50% month on month; after deducting non-net profit of 36 million yuan, -46.52% year on year, +136.50% month on month.
OCA optical film is under pressure, and the downward pressure in demand has improved month-on-month. The company is a leading enterprise in the domestic OCA optical film industry. Its products are mainly used in consumer electronics (smart phones, computers, wearable devices, etc.), automotive electronics, etc. According to Canalys data, 2023Q1 global smartphone shipments fell 13% to 270 million units. The 2023Q2 global smartphone market was -10% year-on-year, reaching 258 million units, and the market decline has slowed somewhat. Affected by the decline in industry demand, the company's OCA business was developed and the capacity utilization rate fell short of expectations, resulting in revenue of the electronic grade adhesive materials sector being -3.90% year-on-year; however, the company's cost control was good, and the gross margin was +2.66%. Furthermore, DIGITIMES predicts that global shipments of folding screen phones may reach 27.8 million units in 2023, +51.91% compared to the same period. The number of folding screen mobile phone screens is higher and the growth rate is high, and the demand for OCA optical film is greater, which is expected to become its new growth point.
The amount of film materials used in electronics is imminent, and coating materials for new energy are used to create incremental amounts. Electronic film materials: mainly including precision release film, polarizer protective film, PET2, PET3 and other items. According to the 2023 mid-year report data, the engineering progress of the above projects is 95%, 91%, 85%, and 70% respectively. Among them, precision release films can be used for MLCC release films and OCA release films, and PET production capacity can be used as raw materials for release films and protective films, which is expected to reduce production costs. Coating materials for new energy: mainly including protective film, composite copper foil, composite fluid collector, extreme ear tape, expansion tape, UV high shear insulation material, composite blue film, etc.
The products planned for the project are mainly for new energy batteries. Among them, protective film, polar ear tape, etc. are new application development based on the company's existing products; while composite copper foil, composite fluid collector, etc. are new product development using the company's existing products and technical advantages. In line with the development trend of the industry, the construction cycle of the overall project plan is 1.5 years. The company's projects based on plans in the electronics field and the new energy sector are expected to open up space for future growth, with significant increases.
Investment suggestions: With the gradual recovery of consumer electronics, the company's leading edge in OCA optical adhesives, the integrated layout of film materials, and plans in the field of new energy, we expect the company to achieve revenue of 2,788/37.15/4.333 billion yuan in 2023-2025, net profit of 287/497/619 million yuan, corresponding PE of 27.21/15.72/12.61 times, maintaining the “increase in holding” rating.
Risk warning: Market competition increases risk; downstream demand falls short of expected risk; OCA business order conditions fall short of expected risk