Items:

According to the company's semi-annual report for 2023, the company realized operating income of 1.56 billion yuan in the first half of 2023, + 10.7% of the same period last year, 30 million yuan of net profit,-84.8% of the same period last year, and 20 million yuan of non-return net profit, which was-90% of the same period last year. Among them, the company's Q2 in 2023 achieved revenue of 810 million yuan, year-on-year + 14.6%, month-on-month ratio + 8.8%, home net profit-10 million yuan, year-on-year-109.3%, month-on-month ratio-124.2%, deduction of non-net profit-20 million yuan, year-on-year-119.0%, month-on-month ratio-148.6%.

Comments:

The overall downward trend of processing fees in the copper foil industry, copper foil enterprise profits continue to bear pressure. Affected by increased competition in the industry, lithium copper foil processing fees continued to decline in the second quarter. The average price of 6 micron lithium copper foil in the industry was about 24,000 yuan / ton, down about 45% from the same period last year and about 28% month-on-month. As a result, the company's profitability was under pressure. Q2 gross profit margin was 4.6%, down 18.4pcts from the same period last year and 8.7pcts from the previous month.

Inventory has improved on a month-on-month basis and the financial position has remained sound. 23 at the beginning of the year, the industry de-inventory superimposed off-season impact, the company Q1 inventory accumulation is higher, Q2 has improved, 2023H1 inventory amount totaled 500 million yuan, compared with Q1 decreased by 120 million yuan. As of 2023H1, the company's asset-liability ratio is 22.5%, debt ratio remains low, cash is 620 million, transactional financial assets are 1.38 billion, operating cash flow is 18 million in the first half of the year, and the financial position is sound.

Production capacity construction is progressing smoothly and new product research and development is actively carried out. By mid-2023, the company has built a production capacity of 42500 tons of electrolytic copper foil, and the construction project of 13000 tons of high-performance electronic copper foil has begun trial production; during the reporting period, the company continued to increase cooperation with key scientific research institutions, at the same time, the company is increasing research and development investment in new products and new technologies, and actively promote the research and development and production of high-performance copper foil, composite current collector and other products.

Investment suggestion: under the intensification of competition in the industry, copper foil processing fees continue to decline as a whole, and the company's profits are under pressure. We have lowered the company's profit forecast. It is estimated that the company's return net profit for 23-25 years will be 1.4pm 3.0 / 380 million yuan respectively (the original forecast for 23-25 years will be 3.73pm 790 million yuan respectively). With reference to the industry average valuation, the 24-year performance will be given 20 times PE, corresponding to the target price of 45.60 yuan. Maintain the recommended rating.

Risk hints: sales of new energy vehicles fall short of expectations; acceleration of industry expansion leads to intensified competition; and new technology advances squeeze the traditional lithium copper foil market more than expected.