Event: the company publishes its 2023 semi-annual report. 2023H1 achieved a total operating income of 611 million yuan, a year-on-year-9.60%, a net profit of 1.12 million yuan, a year-on-year net profit of-96.52%, and a non-return net profit of-11.49 million yuan, a year-on-year profit of-33.55 million yuan. In the single quarter, 23Q2 achieved a total operating income of 274 million yuan,-23% year-on-year and-19% month-on-month; realized net profit of-2.33 million yuan,-33.45 million yuan and-5.77 million yuan; and deducted non-return net profit of-14.21 million yuan, year-on-year-36.84 million yuan and month-on-month profit of-1693 million yuan.

Comments:

EVA particles inventory price loss of 25.95 million yuan, 23H1 deducted non-return loss. In the first half of 2023, the purchase price of EVA particles has continued to decline since March. According to Baichuan Yingfu, the average price of 23H1EVA particles is 15932 yuan / ton, which is-32% compared with the same period last year. The average price of EVA particles per quarter of 23Q2 is 14857 yuan / ton,-42% compared with the same period last year, and-13% compared with the same period last year. Affected by the continuous price reduction of EVA particles, 23H1 suffered inventory price loss and contract performance cost impairment loss of 25.95 million yuan, and the decline in photovoltaic packaging film gross profit margin pulled down the company's overall gross profit level, resulting in a decrease in net profit and deduction of non-homed net profit loss during the reporting period. The price of 23Q3 EVA particles has gradually stabilized. As of September 6, 2023, the average price of EVA particles was 14938 yuan / ton,-38% year-on-year and + 1% month-on-month. The company is expected to control the cost of inventory so as to improve its operating performance.

Photovoltaic film rapid volume, 23H1 sales + 48% compared with the same period last year. Since 2022, the company's photovoltaic film production capacity has expanded steadily, and the production capacity has increased rapidly. By the end of 2022, the company has achieved an annual production capacity of about 160 million square meters of photovoltaic packaging adhesive and film; two factories in Kunshan of 23H1 have been put into production, and equipment has been installed one after another in the third quarter, with an estimated production capacity of 350 million square meters by the end of 23 and 600 million square meters by the end of 24. 23H1 company photovoltaic film rapid volume, sales growth of 47.72% over the same period last year, the company's photovoltaic film business has entered a period of rapid growth.

The demand for downstream components is expected to improve and the customer introduction is smooth. Recently, the price of silicon has fallen sharply from last year's high. affected by it, the demand for components is expected to pick up in the second half of the year, and the price and profit of photovoltaic film are expected to be repaired. The company accelerates the development of key customers. At present, the customers that have been supplied include Zhengtai, Yiyi, Dongfang Risheng, Xiexin, etc., while other large customers are under introduction and testing. With the improvement of the production capacity of photovoltaic film, the improvement of industry demand and the continuous introduction of customers, as well as the improvement of the production capacity of a variety of products such as POE film, the company's photovoltaic film business is expected to achieve profit improvement, thus enhancing the overall profitability of the company.

Earnings forecast, valuation and rating: due to the pressure of inventory decline, the company's 23H1 performance is under pressure. we downgrade the company's profit forecast for 23-24 and add 25-year profit forecast. it is estimated that the 23-25-year net profit of the company is 0.36 yuan (down 86%) / 1.22 yuan (down 57%) / 228 million yuan, respectively, and the corresponding EPS is 0.08 yuan 0.28pm 0.53 yuan per share. In view of the high growth of the company's photovoltaic film business, we maintain our "buy" rating on the company.

Risk hint: raw material price fluctuation risk, new capacity put in less than expected, photovoltaic film demand is not as expected.