Events:

On October 29, Ruihuatai released its third quarterly report for 2023: in the first three quarters of 2023, the company achieved operating income of 209 million yuan,-6.67% compared with the same period last year, and net profit of-8 million yuan,-121.69% compared with the same period last year. The weighted average return on net assets was-0.75%, down 4.71% from the same period last year.

The gross profit margin on sales was 27.62%, down 13.45% from the same period last year; the net profit margin on sales was-3.68%, down 19.51% from the same period last year.

Of these, 2023Q3 achieved revenue of 87 million yuan, year-on-year + 41.19%, month-on-month + 11.91%; net profit of 259900 yuan,-96.87% and + 179.04%; and the average rate of return on net assets was 0.03%, a decrease of 0.89% over the same period last year, and an increase of 0.06%.

The gross profit margin of sales was 26.71%, 11.89% lower than the same period last year, 1.07% lower than the same period last year; the net sales profit margin was 0.30%, 13.27% lower than the same period last year, and 0.73% higher than the previous year.

Main points of investment:

Revenue growth in the third quarter is relatively large, the field of new energy vehicles PI film to promote smooth 2023Q3 company to achieve revenue of 86.5154 million yuan, year-on-year + 25.2415 million yuan, month-on-month + 9.2066 million yuan; to achieve a net profit of 259900 yuan, year-on-year-805.34 million yuan, month-on-month + 5887 million yuan. The company's revenue increase is mainly due to the gradual recovery of the electronic consumer market, while the company actively develops the PI film market in the field of new energy vehicles. 2023Q3 achieved gross profit of 23.1098 million yuan, year-on-year-543600 yuan, month-on-month + 1.6359 million yuan, mainly due to changes in product structure and the decline in sales prices led to a decline in gross profit margin, especially since the beginning of the year, South Korea PIAM Company significantly reduced the price of thermal control PI film to increase the pressure of competition.

2023Q3's other income was 1.745 million yuan, year-on-year-4.6981 million yuan, month-on-month-358100 yuan, mainly due to a year-on-year decline in government subsidy revenue. In terms of period expenses, the sales / management / R & D / financial expenses of 2023Q3 Company are respectively 187.58892.50x79986 million RMB, compared with the same period of last year + 25.32pm / 1508max / 134.29pm / 469900RMB, month-on-month + 27.47pm / 83.60kb / RMB4902 million. The increase in R & D investment and the issuance of convertible bonds in August 2022 have increased the R & D expenses and financial expenses. In the first three quarters of 2023, the net cash flow generated by the company's operating activities was 58.7459 million yuan, a decrease of 27.49% over the same period last year, mainly due to the reduction in cash received from the sale of goods and services, as well as various taxes and fees paid. In the first three quarters of 2023, the cash received by the company in selling goods and providing services was 152.9604 million yuan,-26.8861 million yuan compared with the same period last year; the taxes and fees paid by the company were 19.4009 million yuan, + 8.7115 million yuan compared with the same period last year.

The fourth quarter is the peak season of consumer electronics, with the release and promotion of new smartphones in many terminals, the replacement cycle will be accelerated, and the consumer electronics market is expected to recover slowly. At the same time, with the development of PI thin film application in the field of new energy vehicles, the market space of PI thin film is expected to be further expanded. The company Jiaxing Ruihuatai 1600 tons fund-raising project 4 main production lines began to feed for product commissioning, and the other 2 main production lines are being installed. With the recovery of consumer electronics, the opening of market space in the field of new energy and the release of production capacity of the company's fund-raising projects, the company's profitability is expected to be repaired.

Part of the production line of the Jiaxing project has entered the product commissioning stage, CPI is in the process optimization stage, the company Jiaxing Ruihuatai 1600 tons of high-performance polyimide film project, four main production lines and the installation of plant systems have been completed, of which two production lines were put into use in September, and the process commissioning of the two production lines continues to advance. The other two main production lines are entering the final stage of installation and strive to have commissioning conditions by the end of the year. The company independently grasps the core technology of CPI film preparation, and the products have excellent optical and mechanical properties, and can be folded for more than 200,000 times. the key performance has been evaluated by domestic terminal brand manufacturers, and sample sales have been realized for product testing of terminal brand manufacturers and their supporting suppliers. The company's optical grade CPI special production line is in the process optimization and upgrading stage, and after the optimization is completed, it can realize the application of CPI film products in the field of flexible display electronic products such as folding screen mobile phones, which is expected to fill the domestic gap in this field. At present, Shenzhen Company has achieved mass production of 9 production lines, and the CPI special line has entered the process optimization stage. After the completion of the Jiaxing high-performance polyimide film project, the number of the company's production lines will further increase, and the technical level of the production lines will continue to improve with the accumulation of technical experience. in the future, enterprises with production capacity and multiple production lines and mastering a variety of process routes will have stronger industrialization ability, and can put new products into mass production more quickly and efficiently, so as to continuously enrich the variety of products and expand downstream application fields. It will help to increase the market share and enhance the comprehensive strength.

PI thin film has a broad space for development, and the company has a rich variety of products. PI film is the highest temperature-resistant polymer film material, and it has broad prospects in the fields of flexible display, integrated circuits, new energy, flexible electronics, thermal control management and so on. With the development of 5G communication, the demand for PI film is increasing rapidly in the field of heat conduction and heat dissipation of 5G mobile phone chips, screens and other high-power devices and 5G communication high-frequency high-speed circuit boards with low dielectric demand. With the rapid improvement of the permeability of new energy vehicles, the requirements for lightweight, safety, battery life and charging speed are higher and higher. The demand of PI film in new energy vehicle battery (FPC circuit board, lithium battery wrapped PI film, fluid collector composite copper foil, etc.), motor (engine insulation coil) and other fields is expected to be developed.

In the first three quarters of 2023, the company's R & D expenditure was 24.0875 million yuan, an increase of 20.27% over the same period last year; R & D expenses accounted for 11.55% of operating income, an increase of 2.59% over the same period last year. The company continues to maintain R & D investment in accordance with the technology development roadmap, and continues to promote the development of flexible display, new energy, integrated circuit packaging, aerospace applications and other polyimide materials. The company's optical grade pilot production line is in the stage of equipment and process optimization, while the company has increased the development of a series of products for optoelectronic applications; PI film for COF for integrated circuit packaging applications has completed several evaluations in common technology with downstream application units; the development of two PI slurries has completed laboratory work and evaluation, and completed the design of pilot production line at the same time TPI flexible substrate has completed the evaluation and certification of the sample, and the product will be mass produced in the new production line of Jiaxing; the space application of high insulation 1500mm width PI film has entered the project acceptance stage. Based on the mature formulation design technology, the company's product layout covers three functional forms of PI film: dielectric materials, functional materials and structural materials. Product categories include thermal control PI film, electronic PI film, electrical PI film, aerospace and aviation PI film, flexible display CPI film and other categories, among which a number of products break the market monopoly of foreign manufacturers. It has a strong advantage in the variety of products, which helps to enhance the anti-risk ability, and lays a good market foundation for the company's business development.

Profit forecast and investment rating

Considering the operating situation of the company in the first three quarters and the market situation in the fourth quarter, we make appropriate adjustments to the company's performance. It is estimated that the company's return net profit in 2023-2025 will be 0.10,0.95 and 196 million yuan respectively, and the corresponding PE in 2024-2025 will be 38 and 19 times respectively. The company is a leading PI film enterprise, Jiaxing project is about to put into production, CPI film is in the process optimization stage, is expected to achieve domestic substitution, optimistic about the company's long-term development, maintain the "buy" rating.

Risk hint

The risk of lower-than-expected product performance, the risk of technology diffusion, the risk of a large gap between business scale, product technology and international well-known enterprises, the risk of change in product structure, the risk that it is difficult to digest the new production capacity after the implementation of the fund-raising project, the risk of customer structure change, the risk of technological innovation and product development lagging behind market demand, and the risk of fluctuation of raw material procurement price.