Core views

Shuangxing New Materials achieved revenue of 2,562 million yuan, a year-on-year decrease of 26.45%; net profit of 29 million yuan, a year-on-year decrease of 95.99%; corresponding to Q2, a quarterly revenue of 1,285 million yuan, a year-on-year decrease of 26.70%, and a year-on-year net profit of 26 million yuan, a year-on-year decrease of 92.62%, a year-on-year increase of 957.92%; net profit without deducting 0.13 billion yuan, a year-on-year decrease of 91.83%, a year-on-year increase of 640.33%. The company segmented the market to form collaborative development of new materials in five major sectors, progressed capacity building for the first phase of 500 million square MLCC release film and composite copper foil, signed the first PET composite copper foil project order, implemented 16 new product layout and development projects, and achieved mass production, accelerated the expansion of the domestic market, strengthened the overall competitiveness of various sectors, and helped the company develop steadily.

occurrences

On August 27, the company released its 2023 semi-annual report: H1 achieved operating income of 2,562 million yuan in 2023, a year-on-year decrease of 26.45%; realized net profit of 29 million yuan, a year-on-year decrease of 95.99%; realized net profit after deducting non-return net profit of 115 million yuan, a year-on-year decrease of 97.73%. The company's overall gross profit margin was 8.44%, and the net interest rate was 1.12%; among them, the corresponding Q2 quarter revenue was 1,285 million yuan, a year-on-year decrease of 26.70%, and a year-on-year net profit of 26 million yuan, a year-on-year decrease of 92.62%, a year-on-year increase of 957.92%; net profit after deduction was 0.13 million yuan, a year-on-year decrease of 91.83%, and a year-on-year increase of 640.33%.

Brief review

The industry is recovering at the bottom, and Q2 performance improved month-on-month

In 2023, H1 achieved operating income of 2,562 million yuan, a year-on-year decrease of 26.45%; realized net profit of 29 million yuan, a year-on-year decrease of 95.99%; realized net profit after deducting non-return net profit of 115 million yuan, a year-on-year decrease of 97.73%. The company's overall gross profit margin was 8.44% and the net interest rate was 1.12%; among them, the corresponding Q2 quarterly revenue was 1,285 million yuan, a year-on-year decrease of 26.70%, and a year-on-year net profit of 26 million yuan, a year-on-year decrease of 92.62%, an increase of 957.92%; net profit after deducting non-attributable net profit of 03 million yuan, a year-on-year decrease of 91.83%, and a year-on-year increase of 640.33%. In the first half of 2023, market demand in the polyester film industry increased, industry investment grew rapidly, and the market share of high value-added products increased, but overall there was excess low-end production capacity, insufficient high-end production capacity, and a trend towards oversupply, and the company's business performance declined across the board.

By product, in 2023, H1's optical material film/new energy material film/variable information material film/heat-shrinkable material film/polyester functional film/other business achieved revenue of 11.31/5.02/1.39/2.03/5.59/0.27 billion yuan, respectively, with gross profit of 0.94/0.64/0.48/0.45/-0.62/0.27 billion yuan, respectively, with gross profit margins of 8.35%/12.69%/34.46%/22.05%/-11.06%/99.49%.

The new materials strategy is clear, and the five major sectors are developing collaboratively

In H1 in 2023, the company firmly promoted the development of new materials in strategic emerging industries, aimed at major trends in industry development, and segmented the market to form collaborative development of new materials in five major sectors. In the optical materials sector, the company has increased the layout of MLCC release films, and the construction of production capacity and market development work for the first phase of 500 million square MLCC release films is progressing steadily. The four-layer composite film has been supplied in batches. In terms of market development, after becoming a global supplier of Samsung VD optical films, the company has accelerated the expansion of the domestic market, and the domestic market share of optical films has steadily increased. In the new energy materials sector, the company is actively promoting the “PET Enhancement Project” and the “Coated Composite Backplate Project” to steadily expand project production capacity with a view to further increasing market share. In the composite copper foil sector, the company signed the first PET composite copper foil project order, achieving a major breakthrough from 0 to 1. Up to now, production capacity construction for the first phase of composite copper foil is progressing in an orderly manner, and related equipment has entered the site one after another for installation and commissioning. In the variable information materials sector, the company has carried out comprehensive cooperation with well-known enterprises at home and abroad. The concentration of downstream customers is high, and the customer advantages are obvious. In the heat shrinkable materials sector, the company has established cooperation with major domestic brand customers. The company currently has a production capacity of 50,000 tons of PETG heat shrinkable film and a production capacity of 100,000 tons under construction. The company's market share has further increased after production capacity is released. In the polyester functional film sector, the company actively faces industry challenges, improves production and operation efficiency through production line transformation and other measures, closely follows the needs of end customers, and adjusts the product structure to achieve stable business management.

Profit forecast and valuation: The company's net profit for 2023, 2024, and 2025 is expected to be 150 million, 350 million yuan, and 650 million yuan, respectively; EPS is 0.13 yuan, 0.30 yuan, and 0.57 yuan respectively; corresponding PE is 72.3X, 31.2X, and 16.6X, respectively.

Risk analysis

(1) Industry competition risk: Due to the excellent material performance of polyester film, the production scale of the enterprise continues to expand. Although the company is a leading enterprise in the domestic polyester film industry with high-quality development, a complete range of products and strong brand advantages, and has gained a certain competitive advantage in scale and cost, with the development of the industry, the company faces the risk of increasing market competition. If the company cannot correctly judge and grasp the market dynamics and development trends of the industry, and cannot launch new products and optimize the product structure in a timely manner according to technological development and customer demand changes, then there is a weakening of the competitive advantage. the risk of performance falling short of expectations;

(2) Risk of price fluctuations of the main raw materials: The company is a polyester material manufacturer. The raw materials are mainly MEG, PTA, etc., and the amount used is large. The market price fluctuations are mainly affected by oil market conditions. There is a risk that the prices of the raw materials purchased by the company will fluctuate, which may affect the company's gross profit margin, which in turn affects the company's profitability;

(3) Risk of whether the project can achieve the expected benefits: The company's construction projects have been fully investigated and verified, and have a good technical and market foundation.

However, the feasibility analysis of the company's investment projects is a reasonable judgment based on factors such as the current market environment, existing technical foundation, and development trends. If there is a major adverse change in the future market environment, international trade disputes, or technical level, or if the overall macroeconomic situation declines sharply, leading to a sharp drop in product unit prices or insufficient capacity utilization, it may have an impact on the expected profit level of the company's fund-raising projects over a period of time.