Main points of investment:

Announcement: the company achieved income of 2.871 billion yuan in the first three quarters, + 1.95% year-on-year; net profit of 715 million yuan, + 3.34%, and non-net profit of 728 million yuan, + 4.27%. 3Q23 realized income of 900 million yuan, year-on-year-14.59%, net profit of 223 million yuan, year-on-year-13.85%, and non-net profit of 219 million yuan, year-on-year-18.13%. The performance was slightly lower than expected.

The scale of the company's thin film capacitor is the leading in the world, and the revenue end is under short-term pressure. 3Q23 realized revenue of 900 million yuan,-14.59% year-on-year and-13.69% month-on-month. In the short term, the income side is under pressure. The company achieved revenue of 2.871 billion yuan in the first three quarters, + 1.95% of the same period last year.

3Q23 gross profit margin increased compared with the same period last year, profitability is strong. 3Q23 gross profit margin was 38.51%, up 0.68pct from the same period last year. When R & D expenses increased by nearly 50% month-on-month and exchange earnings decreased, the net profit rate remained relatively stable.

The new energy market will continue to be the main driving force for the growth of the thin film capacitor industry. In recent years, the traditional application of thin film capacitor household appliances and lighting market has entered a mature stage, and the demand trend is stable. However, in new markets such as photovoltaic wind power and new energy vehicles with high prosperity, thin film capacitors are widely used because of their advantages such as high voltage resistance, high reliability, long life and excellent frequency characteristics. According to the China Automobile Association, sales of new energy vehicles reached 6.887 million in 2022, an increase of 93.4 per cent year-on-year, and the market share increased by 12.1pct to 25.6 per cent. According to the statistics of the China Photovoltaic Industry Association, the newly installed global photovoltaic capacity CAGR reached 27.26% from 2019 to 2022, and it is expected that the new installed capacity of global photovoltaic will exceed 300GW in 2030. In 2022, China's newly installed photovoltaic capacity is 87.4GW, of which distributed photovoltaic added 51.11GW, accounting for 58.47%.

Investment analysis opinion: increase the profit forecast and maintain the overweight rating. It is optimistic that the company leads the world in the scale of thin-film capacitors and is the first to benefit when the downstream new energy demand ushered in high growth opportunities, but taking into account the industry demand, the 23-24 year net profit is reduced to 10.65 yuan and 1.236 billion yuan (the original forecast is 14.11,17.63 respectively), and the 25-year net profit is increased by 1.405 billion yuan, corresponding to 24PE 19x, which is relatively low in historical valuation (valuation center 35x in recent 5 years). Maintain the overweight rating.

Risk hint: the risk of rising prices of raw materials; shipments of new energy vehicles or photovoltaic capacity are not as expected