Incident: On August 30, 2023, the company released its 2023 semi-annual report. 2023H1 achieved operating income of 2,221 million yuan, down 1.66% year on year; realized net profit of 50,3586 million yuan, a year-on-year decrease of 71.25%; realized net profit of 41,5821 million yuan, a year-on-year decrease of 76.12%; gross margine/net interest rate for the 2023Q2 single quarter was 12.02%/1.44%, respectively, +3.87pct/-1.74pct.

The adhesive film shipment is cashed out, and profits are still being repaired. The company's photovoltaic film products cover various application scenarios. In the process of accelerating N-type technology, the company's N-type packaging film shipments were released as scheduled, achieving revenue growth.

In the first half of 2023, the company's packaging film business achieved revenue of 1,301 million yuan, an increase of 13.06%, an increase of 14.38%; film sales reached 126 million square meters, an increase of 57.50%, and a year-on-year increase of 42.05%. Among them, N-type packaging film performed well. In the first half of the year, TopCon film shipments increased by 282.65% month-on-month, and phototransfer film shipments increased 413.67% month-on-month. In terms of profitability, the price of the company's Q2 film is 9.66 yuan/square meter, and the net profit of a single ping is a slight loss. In the first half of the year, the price of adhesive film raw material particles fluctuated at a low level, and the price of adhesive film fell. Currently, the upward trend in adhesive film prices is beginning to show. Combined with the impact of high-priced inventory particles, it is already coming to an end in Q2. It is expected that the profit level of adhesive film will increase significantly in the second half of the year. The company's TopCon single-glass module packaging film and HJT phototransfer film have a price premium. With the further expansion of N-type TopCon modules and the advancement of HJT industrialization in the second half of the year, the company's adhesive film business is expected to overtake the N-type curve, and quantitative performance can be expected.

The backplane product matrix is full, and the gross margin has increased steadily. In the first half of 2023, the company's backplane shipped 8.1452 million square meters, maintaining steady growth, achieving revenue of 743 million yuan, a year-on-year decrease of 21.41%, and a steady increase in gross margin, providing strong support for the company's overall profitability. The company's idea of expanding backplane product types and optimizing the product structure has been verified. The number of high-margin backboard products exported to foreign head component manufacturers, such as transparent backboards, transparent grid backboards, and high water resistance backboards, has increased. The black highly reflective backboard has been sold one after another to component manufacturers such as Tianhe, Artes, and Aixu, etc., and the cornerstone of the backboard business has been further stabilized.

New small products have been successfully introduced, and the advantages of innovative platform-based enterprises have been fully demonstrated. Demand innovation is the driving force for the development of materials enterprises, technological innovation is the key to achieving competitive advantage, and the company's ability to innovate is at the leading level in the industry. In the photovoltaic business, the company introduced light transfer film and the world's first special high water resistance edge banding adhesive for HJT to help reduce the cost and increase efficiency of heterogeneous junctions. In the non-optical business, the company frequently introduces new products in the electric vehicle materials, consumer electronics materials, semiconductor materials, and industrial tape business. In the first half of 2023, the company's electric vehicle materials achieved revenue of 188 million yuan. The water-cooled board insulation film, an inventive product that replaced powder coating, and the FCC insulation film for flat cable, which replaced flexible circuit boards, successfully completed marketing and customer introduction. Many of the company's innovative products have high profitability, and platform-based development can suppress the adverse effects of fluctuations in a single business profit and help the company's performance grow.

Investment suggestions: Considering that the price of adhesive film continues to be low, it will take a certain period of time for the price to rebound. The company's revenue from 2023-2025 was reduced to 6.014 billion yuan, 8.739 billion yuan, and 11.836 billion yuan (original values were 7.061 billion yuan, 10.364 billion yuan, and 13.267 billion yuan), and net profit reduced to 277 million yuan, 577 million yuan, and 853 million yuan respectively (original value was 534 million yuan, 783 million yuan and 1.06 billion yuan), up 61.7% and 108.3% year-on-year , 47.8% The corresponding EPS is 0.63, 1.31, and 1.94, and the PE multiples corresponding to the current stock price are 26.2X, 12.6X, and 8.5X, respectively, giving a “buy” rating.

Risk warning: capacity expansion falls short of expectations; industry competition intensifies; downstream demand falls short of expectations; risk of fluctuations in raw material prices, etc.