The company successively reached a strategic cooperation agreement with Youwei Polymerization and Suzhou Weixin in LCP film business, and signed a "strategic cooperation agreement" with Youwei Polymerization and Suzhou Weixin to cooperate on the R & D and mass production of the full range of LCP thin film products. The downstream of LCP is mainly used in high-frequency connectors in the form of resin. After the gradual landing of 5.5G, it is expected to expand the application of LCP film in mobile phone antenna FPC. Due to the high requirements of resin raw material formula, production process and equipment for LCP film production, and high barriers to entry, the company, as the only company in the world to open the LCP resin-film industry chain, is expected to fully benefit from the industry trend. We maintain the 2023-2025 return net profit forecast of 7.78,11.31 and 1.711 billion yuan, the corresponding share price PE is 18.2,12.5,8.3 times, and maintain the "buy" rating.

The full range of 5.5G products has been released, and it is expected to repeat the rapid 0-1 process of 5G in 2024. It has only been one and a half years since the first experimental base station was opened in 2017 to the first official base station in January 2019. It has been only two years since the commercial license issued in June 2019. The first 5.5G experimental base station was opened in Beijing in May 2023, and the industry's first 5.5G AAU was released in July 2023, and a full range of product plans were released in October, announcing that 5.5G end-to-end products will be released in 2024, which is expected to promote the rapid landing of 5.5G.

It is estimated that the market space of LCP film in mobile phones is expected to reach 6.31 billion yuan in 2027. According to IDC and TechInsights forecasts, the global 5G mobile phone shipments will reach 7.70 and 797 million units respectively from 2023 to 2024, and 5.5G mobile phones will reach 100 million units in 2024. As the current MPI film has obvious loss in the 5.5G communication band, we expect that LCP film will become the main choice in 5.5G mobile phones. We estimate that the market space of LCP film from 2024 to 2027 will be 4.6,17.4,42.0 and 6.31 billion yuan respectively.

The company is the pioneer of LCP domestic substitution, and the whole industry chain layout is expected to fully enjoy the industry dividend. The company is the first domestic supplier of LCP materials, and it is also the only enterprise in the world to pull through the LCP resin synthesis, modification, film, and fiber industry chain. in the batch supply of LCP modified materials to major customers at home and abroad, the fiber has been recognized by international customers and mass produced, and the film has been tested and approved by downstream customers. There has been a small batch supply, is expected to fully enjoy the LCP film industrialization dividend.

Risk hint: LCP business expansion is not as expected, increased competition leads to the risk of profitability decline.