Event: the company released three quarterly reports, 3Q23 revenue of 97.6 million yuan, an increase of 2% month-on-month, an increase of 43% over the same period last year. At the same time, benefiting from the improvement of product structure and cost reduction measures, the gross profit increased significantly, the net profit per quarter was-8.85 million yuan, and the loss was significantly improved compared with the same period last year.
The structure of electromagnetic shielding film products has improved, and the two major customers have increased significantly: although Counterpoint data show that global smartphone sales fell 8% in the third quarter compared with the same period last year, the company's shielding film sales increased significantly in the third quarter compared with the same period last year. At the same time, the sales of the company's shielding film high-end products (USB series) increased significantly, which significantly improved the company's product structure and gross profit margin. With the launch of Huawei's new Mate 60 model, we expect Huawei to sell 43 million / 80 million phones in 2024, benefiting from the rapid growth in shipments and the demand for high-end electromagnetic shielding films for Mate/P models.
At the same time, 5.5G will also further enhance the requirements of shielding effectiveness, driving the company's product unit price up. On the other hand, the company's overseas major customers are progressing smoothly, and we estimate that overseas major customers will account for about 46% of the mobile phone electromagnetic shielding film market in 2022. The company is currently in the cooperative factory review stage with Samsung SDI and Pengding and other leading enterprises, or begin to introduce products in 2024.
Copper foil business to limit production and reduce losses, waiting for peelable copper volume: as the copper price has gradually entered the decline channel since the beginning of 23, the company's ordinary copper foil price and gross profit are under pressure. Since the third quarter, the company has taken a series of measures for ordinary electronic copper foil, including adjusting the internal structure of products, controlling quantity and raising prices, improving product yield and reducing costs, etc., reducing losses in copper foil business during the quarter. On the other hand, the company's three quarterly reports revealed that strippable copper foil customer certification has made a breakthrough and further obtained small sample orders, and we expect the company to enter the release period in 24 years. Peelable copper currently has a market space of nearly 4 billion yuan, and its main application scenarios include high-end BT carrier boards for mobile phone SoC and high-end models such as Apple Inc / Samsung / Huawei, while the company will fully benefit from the domestic demand for upstream raw materials for Huawei mobile phones.
Valuation and suggestion: the company's layout materials are not directly matched in A shares, and we suggest that we compare the valuation level of semiconductor material manufacturers. We forecast that the company's net profit in 2025 will be-58 million / 75 million / 263 million yuan (the original forecast is-46 million / 94 million / 276 million yuan), and give the company 25x 2025 PE (vs 58% 2025-2028 net profit CAGR). As the release of new products still takes time, profits will be reduced by 4.7% in 2025, and the valuation will remain unchanged). The corresponding target price will be discounted at 10% WACC at 68 yuan (corresponding to 73x 2024PE) (the original target price is 72 yuan,-6%, discounted at 9.5% WACC, corresponding to 60x 2024PE), maintaining the "better than the market" rating.
Risks: 1) new product promotion is not as expected; 2) competition intensifies; 3) copper prices continue to rise and impact profitability; 4) capacity release is not as expected.