Event: The company released its semi-annual report for 2023. 2023H1 achieved operating income of 2,078 billion yuan, +7.42% year on year, realized net profit of 210 million yuan, -92.62% year on year, deducted non-net profit of 5.6885 million yuan, year on year, -97.97% year on year; of these, 23Q2 achieved operating income of 1,094 million yuan, +12.60% year on year, realized net profit of -316 million yuan, -113.68% year on year, achieved non-net profit of -03 billion yuan, -126.56% . Affected by factors such as increased market competition, lower processing costs, and changes in the relationship between supply and demand, the company's profitability is under pressure in the short term, and overall performance is slightly lower than market expectations.

23H1 Downstream demand has slowed, and the industry has entered a bottom-building stage. Downstream demand slowed in 2023, compounded by a strong desire to remove copper foil from storage, falling short of expectations, and increased competition in the industry led to a decline in processing fees. According to SMM data, processing fees for 6 μm lithium foil in the first half of the year were about 29,900 yuan/ton, or -34.94%; the company increased sales volume through price cuts, 23H1 achieved 24,800 tons of copper foil sales, +34.00% year-on-year; we expect H2 to increase in downstream demand, and the company's shipment volume is expected to rise month by month. Drive profit recovery, we expect 23 The company shipped 65,600 tons of copper foil for the whole year, +33.4% year-on-year.

R&D investment continues to grow, and production capacity construction is progressing steadily. The company adheres to the concept of innovation-driven development and continues to increase R&D investment and product innovation. 23H1's R&D investment totaled 120 million yuan, +15.97% year-on-year. Currently, the company's composite copper foil pilot production equipment has been installed, and is actively promoting composite copper foil R&D and process optimization. The company's current production capacity is about 80,000 tons/year, and the production capacity under construction is progressing steadily. The 20,000 ton high performance electronic copper foil projects in Jiangxi and Ningde, Fujian have entered the production capacity climbing stage. In addition, the project company cooperating with Ningde Times with an annual output of 100,000 tons will be implemented in stages according to market conditions, and technological innovation and production capacity scale advantages will continue to enhance the company's core competitiveness.

Investment advice: Considering increased competition in the copper foil industry, we lowered our performance expectations. We expect the company to achieve net profit of 0.58/2.37/735 million yuan from 2023-2025, respectively, -88.8%/+305.0%/+210.9%, and the corresponding EPS was 0.14/0.55/1.73 yuan, maintaining the “buy” rating.

Risk warning: capacity construction falls short of expectations; industry competition intensifies; downstream demand falls short of expectations