3Q23 performance is lower than we expected.

The company announced 3Q23 results: revenue of 900 million yuan, same / month ratio of-14.6% and net profit of 13.7% and 14.0% of net profit of 223 million yuan and 13.8% and 14.0% respectively. Revenue and profits are lower than we expected, mainly because light storage customers pull goods momentum is weaker than we expected.

The company's income is under pressure, mainly due to the backlog of inventory in the middle link of the optical storage industry chain. Optical storage is one of the main application fields of thin film capacitors in the company. due to the slow elimination of inverter customer inventory and European channel inventory, the superimposed July-August is an European holiday, and the demand support is weak, which leads to the shipment of 3Q23 inverters downstream of the company, which is mainly used in series and household use, thus affecting the customer's pulling kinetic energy to the company. However, in terms of installed capacity, terminal demand is still strong. Data from the National Energy Administration show that 3Q23 China's newly installed photovoltaic 50.5GW, compared with the same / month-on-month ratio of + 133%, is 13%. We believe that as optical inventory is gradually digested, 4Q23 and 1Q24 may see some demand for replenishment, and revenue is expected to return to rapid growth.

Good cost control and sound profitability. The company's 3Q23 gross profit margin is 38.5%, with a month-on-month ratio of + 0.7ppt / month-on-month. Compared with the same period last year, on the one hand, weak demand and intensified competition lead to lower product prices, on the other hand, the reduction of raw material costs and the optimization of manufacturing processes are conducive to the increase of gross profit margin; compared with the previous year, we judge that it is a structural decline. The 3Q23 sales / management / R & D expense rates are 1.4%, 3.9%, 5.1% respectively, in which the sales / management expense rate is relatively stable, and the R & D expense rate is the same as / month-on-month + 1.9ppt/+2.1ppt. The net interest rate of 3Q23 is 24.8%, which is the same as / month-on-month ratio + 0.2ppt/-0.1ppt, and its profitability is stable.

Trend of development

The company is the core beneficiary of new energy, the industry is prosperous and the company's production capacity continues to expand. We believe that the company, as the global leader of thin film capacitors, has the technology and brand premium, and is expected to maintain a leading product iterative capability, while the improvement of the level of automation and the reduction of upstream material costs are conducive to the release of the company's profits. we are optimistic about the high growth of the company under the demand growth + brand strength double-click.

Profit forecast and valuation

Taking into account the lower-than-expected shipments of optical storage products in the first three quarters and the intensification of competition in the industry, we reduced the 2023 / 2024 net profit by 11.0% to 1.06 billion yuan / 1.36 billion yuan. The current stock price corresponds to 2023 / 2024 Pmax E 21.3x/16.5x. To maintain an outperforming industry rating, due to lower earnings forecasts and a decline in the industry valuation center, we lowered our target price by 14.2% to 135.75 yuan, corresponding to 2023 / 2024 P 28.9x/22.5x, an increase of 36.0% over the current stock price.

Risk

The demand for new energy is lower than expected; the competition in the industry is intensified; the risk of gross profit margin decline.