On August 28, 23, the company disclosed its semi-annual report. In the first half of the year, it achieved revenue of 719 million yuan, a year-on-year decrease of 1.15%; net profit from the previous year was 111 million yuan, an increase of 2.41% over the previous year. Among them, Q2 achieved revenue of 376 million yuan, down 1.53% year on year and 9.27% month on month; achieved gross profit of 78 million yuan, up 43.58% year on year, and 16.98% month on month; realized net profit of 5.96 million yuan, up 3.73% year on year, and 16.05% month on month. The difference in year-on-year growth rate between gross profit and return net profit was mainly due to the high year-on-year increase in company management, R&D, and financial expenses in the first half of the year.
The BP supply has been resolved, and LCP is expected to return to a healthy development phase. Affected by raw material supply and downstream consumer electronics demand in the first half of the year, the company's LCP business achieved revenue of 55 million yuan, down 14.3% and 0.4% from the same period, respectively, and achieved net profit of 760,000 yuan. Since the second quarter of this year, domestic and foreign biphenol (BP) suppliers have resumed batch supply to the company. As more new BP production capacity is put into operation at home and abroad, LCP is expected to return to a healthy development stage on the cost side. On the demand side, the company has developed new applications such as customer communication cooling, new energy vehicle cooling, AI computing power equipment cooling, and low dielectric and low loss high-speed connectors. The 20,000-ton LCP resin material project completed the construction and installation of the plant, supporting facilities and the first phase of the production line.
Waterwell's current performance has increased significantly, and special materials such as PPA are gradually being implemented. In the first half of the year, the company's specialty polymer materials sector achieved revenue of 402 million yuan, up 51% and 22% respectively from the same period, accounting for more than 50% of revenue for the first time, 56%, and gross profit accounting for 72%. Among them, Watford achieved revenue of 102 million yuan, a year-on-month increase of 19%, net profit of 12.58 million yuan, a year-on-month increase of 107%, strengthening the layout of the company's products in the semiconductor industry. The company's PPA phase I of 5,000 tons has been built and put into production. It has been used in scenarios such as power and electronic control systems for new energy vehicles, and precision connectors and Type C in the communications electronics industry. PPA pure resin has been exported in bulk, and construction of the second phase 5,000 tons has already begun; the kiloton PPS modified production line has been put into use, and has obtained certification and use by customers such as downstream new energy vehicles. A fixed increase of 20,000 tons of PPS materials is expected to be gradually produced after a two-year construction period; polysulfone and PAEK production lines have been built and tested in small batches. The polymer material solution can effectively improve the dimensional stability of optical module products under operating conditions.
The company's LCP raw material costs are rising, and downstream electronics demand is under pressure. We revised the net profit for 23 and 24 to be 0.4 million yuan (-84%) and 125 million yuan (-49%), respectively. The estimated net profit for 25 years was 210 million yuan. The corresponding EPS was 0.18, 0.55, and 0.93 yuan/share, respectively. The company's current stock price corresponds to PE valuation 100, 32, and 19 times, maintaining the “buy” rating.
Risk warning
The competitive landscape worsens; demand growth falls short of expectations; R&D progress falls short of expectations.