Event: on August 25, 2023, Sanlipu released its semi-annual report of 2023. In 2023, H1 realized operating income of 972 million yuan, down 10.98% from the same period last year; net profit from home was 23.9464 million yuan, down 82.53% from the same period last year; and net profit from non-return was 11.3974 million yuan, down 90.96% from the same period last year.

Comments: the company's performance in the first half of 2023 is under pressure. Under the influence of macroeconomic trends, the prices of some of the company's polarizer products have fallen to varying degrees, and the gross profit margin of the products has declined, resulting in a decline in 2023H1 profitability. In the second quarter, with the recovery of consumer market confidence, high inventories in the market gradually reduced to a relatively reasonable level, and the company's operating income and non-homed net profit increased significantly compared with the previous quarter. We are optimistic about the speed of production expansion of the company, after all production lines are put into production, it is expected to increase performance flexibility and bring performance growth.

1. Affected by global inflation and sluggish consumption, the company's performance is under short-term pressure.

In the first half of 2023, due to the decline in the prices of some products, the short-term performance was under pressure, but the company's operating income and non-return net profit increased significantly in the second quarter compared with the previous quarter, and the overall trend was better. In the second quarter, the company realized operating income of 546 million yuan, up 28.39% from the first quarter. After deducting non-recurring profits and losses, the net profit belonging to shareholders of listed companies was 7.724 million yuan, up 110.27% from the first quarter. With the gradual pick-up of the downstream terminal consumer market demand, the capacity utilization rate of each product line of the company shows an upward trend, and the order quantity increases rapidly. In terms of profitability, the gross profit margin in the first half of 23 was 13.70%, down 8.9pct from the same period last year, and the net profit rate was 2.50%, down 10.54pct from the same period last year. The decline in profitability is mainly due to the intensification of competition in the industry, the decline in the prices of some of the company's polarizer products compared with the same period last year, and the decline in gross profit margin.

two。 The expansion of production continues and the variety of products is constantly optimized.

The company has four major production bases: Shenzhen ****, Shenzhen Longgang, Hefei, Anhui and Fujian Putian. Hefei Sanlipu Phase II TFT-LCD polarizer production line project (estimated production capacity planning of 30 million square meters / year) has entered the stage of civil construction and is expected to be completed and put into production by the end of 2023. With the completion of the slope climbing of the Longgang Line in the future, the Putian polarizer production line and the second phase of the Hefei polarizer production base have been put into production, the substantial release of production capacity is expected to bring high performance growth. The company already has the production capacity to meet the requirements of many downstream applications, including TN polarizer, STN polarizer, TFT polarizer, OLED polarizer, 3D glasses polarizer and so on. The effective thickness of the product has reached 79 μ m. The company's downstream customers include BOE, Tianma, Huaxing Optoelectronics and other panel leading enterprises, which are expected to achieve steady sales growth through downstream high-quality customer binding.

3. Domestic substitution is accelerated and the cost of materials is expected to be reduced in the future.

Materials account for a relatively large proportion of the company's production costs, and the direct material cost of polarizers in 22 years accounts for 69%. The raw materials needed by the company, such as PVA film, TAC film and pressure-sensitive glue, are mainly purchased from Japan, South Korea and other regions.

At present, the company has set up a "raw material localization" group to find and cultivate suppliers of key raw materials in China, so as to reduce the proportion of raw materials purchased from Japan. at present, it has introduced suppliers of key materials such as Changchun Chemical Industry, Wanwei Hi-Tech and China Le Kai Group, so as to gradually disperse the purchasing places of raw materials. In view of the fact that the production line of Sanli spectrum in Hefei is in a state of full load and the mass production of Longgang plant, the company has increased the purchase quantity of raw materials, and the bargaining power has also gradually improved based on the increase in the purchase quantity of a single supplier. And optimize the process management, implement the "amoeba" business model, reduce production costs.

4. Investment suggestion

The company has great flexibility in expanding production, and we are optimistic that the gradual landing of production capacity will accelerate the growth of the company's performance. In the context of the transfer of production capacity in the LCD industry to the mainland, the company continues to benefit from the opportunity of domestic polarizer. Considering the short-term pressure on performance, we adjust our profit forecast and expect the company to make a net profit of 1.2 / 370 million yuan in 23-24 (original value of 590 million yuan), with a net profit forecast of 440 million yuan in 2025. The company's target price is adjusted to 46.28 yuan (the original value is 60.5 yuan, corresponding to 24-year PE 22X), maintaining the "buy" rating.

Risk tips: panel price fluctuations; downstream demand is lower than expected; the progress of production expansion project is not as expected.