The event company issued the report for the third quarter of 2023. In the first three quarters, the company realized operating income of CNY 209 million, with a year-on-year decline of 6.67%; net profit attributable to parent company was CNY-7,672,700, with a year-on-year decline of 121.69%; net profit deducted from non-parent company was CNY-11,865,600, with a year-on-year decline of 143.90%. By quarter, the company realized operating income of 86.5154 million yuan in the third quarter, with a year-on-year growth of 41.19% and a month-on-month growth of 11.91%; net profit attributable to parent was 259,900 yuan, with a year-on-year decline of 96.87%, turning losses into profits from month-on-month; net profit deducted from non-parent was-1,091,700 yuan, with a year-on-year decline of 144.16%, and month-on-month loss reduction of 1,337,600 yuan.

With the recovery of downstream demand and the market development of new products, Q3 turned from loss to profit on a month-on-month basis During the Reporting Period, the Company's performance declined year-on-year, mainly due to the change in the sales structure of the Company's products and the decrease in sales prices, resulting in the decrease in gross profit margin. Among them, the thermal control PI film has been affected by the sharp price reduction of PIAM Company in South Korea since the beginning of the year, and the competitive pressure has increased. In the first three quarters, the gross profit rate and net profit rate of sales of the company were 27.62% and-3.68% respectively, down 13.46 and 19.51 percentage points respectively year-on-year. Quarterly, with the gradual recovery of the electronic consumer market and the Company's active exploration of PI film market in the field of new energy vehicles, the Company's Q3 performance turned from loss to profit month-on-month. The gross profit margin and net profit margin of Q3 Company were 26.71% and 0.30% respectively, down 1.07 percentage points and up 0.73 percentage points respectively. It is expected that Q4 will continue to warm up with downstream demand, capacity release under construction and PI film market development in the field of new energy vehicles, and the company's performance is expected to further repair upward.

Jiaxing Project is progressing in an orderly manner, and the growth momentum is gradually released. Jiaxing Ruihuatai 1600 tons/year high-performance polyimide film project, a subsidiary of the Company, is progressing steadily. At present, the installation and equipment commissioning of 4 main production lines of 200 tons/year and each factory system have been completed. The other two 400 tons/year main production lines are now entering the final stage of installation and are expected to be ready for commissioning by the end of 2023. When Jiaxing Ruihuatai Project is fully put into operation, the total production capacity of the company will reach 2650 tons/year, which is absolutely leading in China. On the one hand, the new production capacity will help consolidate and enhance the market position of the company's existing products, on the other hand, it will also help the company accelerate the market expansion in the fields of new energy, flexible electronics and high-speed communication.

In the first three quarters of 2023, the R & D expenses of the Company were RMB24.0875 million, an increase of 20.27% year-on-year; the R & D expense ratio was 11.55%, an increase of 2.59 percentage points year-on-year. At present, the company has rich reserves of research projects, and the industrialization prospect of high value-added products under research such as PI for COF, PI with high thermal conductivity, TPI and CPI is good. In the future, the product matrix of the company is expected to be gradually improved, and the market competitiveness of the company in the field of global high-performance PI film is expected to continue to improve.

Investment Recommendations As downstream electronic consumption fell short of expectations, and considering that the gradual release of Jiaxing Project and capacity escalation will cause certain pressure on the Company's short-term performance, we lowered the Company's profit forecast. It is estimated that the company's revenue from 2023 to 2025 will be RMB 310 million, RMB 590 million and RMB 856 million respectively, with year-on-year growth of 2.64%, 90.57% and 45.13% respectively; the net profit attributable to the parent company will be RMB 0.10 million, RMB 0.83 million and RMB 149 million respectively, with year-on-year growth of-74.85%, 752.09% and 79.17% respectively; EPS is 0.05, 0.46 and 0.83 yuan/share respectively, and the corresponding PE is 363.93, 42.71 and 23.84 times respectively. We are optimistic about the long-term growth momentum brought by the production capacity release of Jiaxing Base and the industrialization of products under development, and maintain the "Recommended" rating.

The risks indicate that downstream demand falls short of expectations, raw material prices rise sharply, Jiaxing base capacity release falls short of expectations, products under development fall short of expectations, etc.