On August 30, the company disclosed its 2023 annual report. In the first half of the year, it achieved revenue of 2.4 billion yuan, or -15% year-on-year; realized net profit of 34 million yuan, or -116% year-on-year. Among them, Q2 achieved revenue of 1.05 billion yuan, or 34% year-on-year; realized net profit of 57 million yuan, or -144% of the same period.
Demand fluctuates, prices fall, and film profits are under pressure. It is estimated that in the first half of the year, the company shipped 26-270 million square meters of adhesive film, an increase of more than 20% over the previous year. Among them, Q2 shipped about 111-120 million square meters, a year-on-year decline, mainly due to the rise in EVA resin prices in the early Q2 period and the rise in the company's raw material costs. However, the rapid decline in prices in the mid-late Q2 photovoltaic industry chain caused terminal demand to wait and see, component companies reduced film procurement, and film product prices dropped significantly. In the second quarter, the company's price drop was greater than the cost side drop, and gross margin fell to a lower level. Furthermore, due to large fluctuations in the price of EVA resin in the second quarter, the company calculated inventory depreciation of 43.39 million yuan, which led to losses in the adhesive film business.
Q3 Quantitative restoration, N-type amplification technology advantages. Upstream prices in the photovoltaic industry chain stabilized in July-August, increased module production schedules led to an increase in demand for photovoltaic film, and film production schedules increased markedly. The company started full construction in July-August, and shipments are expected to increase significantly in the third quarter. As demand picks up, film and particle prices have recently rebounded. Considering the low inventory costs of the company's existing raw materials, it is expected that the company's profitability will improve significantly in Q3. Shipments of TopCon batteries increased in the second half of the year. The company actively carried out research and development reserves for related products, added single-layer POE adhesive film, developed EXP and iterative EPE co-extruded POE film products, and at the same time realized independent R&D and industrialization of HJT light transfer agents, continuously improving product competitiveness. In 2018, the company took the lead in launching EPE film in the industry. It has accumulated deep technology and is expected to fully benefit from the N-type development trend and further increase its profitability and market share.
R&D in the automotive sector is advancing rapidly and is expected to contribute new performance growth points. In addition to the photovoltaic sector, the company actively lays out electronic functional films for automotive smart glass, high-strength noise reduction and cooling PVE glass film and new environmentally friendly surface materials, designs new products according to market demand and rapidly improves product performance according to demand. It has become one of the material suppliers that auto parts companies mainly cooperate with for new product development, and is expected to become a new performance growth point for the company.
Profit Forecasts, Valuations, and Ratings
According to our latest judgment on product prices, the company's net profit forecast for 2023-2025 was lowered to 3.63 (-44%), 4.79 (-47%), and 6.68 (-42%) million yuan, maintaining the “buy” rating.
Risk warning
Raw material prices have risen more than expected; the competitive landscape has worsened.