Events:

On October 27, 2023, Swiss New Materials released the third quarterly report of 2023: in the first three quarters of 2023, the company achieved operating income of 932 million yuan,-21.61% compared with the same period last year, and net profit of 98 million yuan,-53.12% compared with the same period last year. The weighted average return on net assets was 3.32%, down 3.92 percentage points from the same period last year. The gross profit margin of sales was 34.29%, down 3.91% from the same period last year, and the net profit margin of sales was 10.52%, down 7.07% from the same period last year.

Among them, Q3 achieved revenue of 316 million yuan in 2023, + 8.31% year-on-year and-7.63% month-on-month; realized net profit of 40 million yuan,-17.17% and-10.09% respectively; and the weighted average rate of return on net assets was 1.36%, a decrease of 0.30 percentage points over the same period last year. The gross profit margin of sales was 37.59%, down 3.63% from the same period last year, an increase of 4.72% from the same period last year; and the net sales margin was 12.59%, 3.87% lower than the same period last year and 0.34% lower than the previous year.

Main points of investment:

The gross profit increased in the third quarter compared with the previous quarter, and the increase in fees dragged down the revenue of Q3 in 2023 to 316 million yuan, + 8.31% from the same period last year,-7.63% from the previous year, and the net profit from the home was 40 million yuan,-17.17% from the same period last year,-10.09% from the previous year,-8 million yuan from the same period last year, and-4 million yuan from the previous year. Among them, Q3 realized gross profit of 119 million yuan, month-on-month ratio of + 6 million yuan, sales expenses of 7 million yuan, month-on-month ratio of + 2 million yuan, R & D expenses of 29 million yuan, month-on-month ratio of + 6 million yuan, financial expenses of-6 million yuan, month-on-month ratio of + 0.06 billion yuan, asset impairment loss of-0.06 billion yuan, month-on-month loss of-0.07 billion yuan, in addition, credit impairment loss of Q2-0.07 billion yuan + 0.07 billion yuan. Gross profit rose month-on-month, or product demand picked up, leading to a rebound in profitability. The company pays attention to the research and development of core technology, continues to increase R & D investment, and R & D costs are higher than the previous month. In addition, the company adjusted its credit impairment in the third quarter and made provision for some asset impairment losses. Looking forward to the fourth quarter, according to CINNO, driven by the peak season stock, the price of mobile phone panels rose steadily in October, in addition, the penetration rate of large-size configuration of electronic dashboards for middle and high-end passenger cars is higher, and the trend of large-screen and multi-screen display in the intelligent cockpit is obvious, which is expected to continue to promote the production and sales of display materials for the company. In addition, the pharmaceutical and electronic materials sector projects continue to advance, optimistic about the company's long-term development.

In terms of period expenses, the sales / management / financial expense rates of 2023Q3 are 2.32%, 13.31%, 1.82%, respectively, year-on-year-0.26/-2.28/+2.99pct, month-on-month + 0.87/+1.17/+1.59pct. 2023Q3, the net cash flow generated by the company's operating activities reached 110 million yuan, + 82.69% compared with the same period last year, mainly due to the decline in cash paid for goods and services.

Mobile phone panel, car screen is expected to continue the tight supply situation, show material leader will benefit from the display panel downstream subdivision plate, the current large-size TV panel market is slightly weak, according to CINNO, Beijing Oriental, Huaxing Optoelectronics and other large panel factories such as G10.5 have taken action to substantially control production However, mobile phone panels and vehicle screens maintain the growth trend, according to CINNO, driven by the peak season stock, the tight supply of mobile phone panels continued throughout the third quarter, entering the fourth quarter, the demand for mobile phone panels is still strong, and prices show a steady upward trend. In terms of vehicle screens, the carrying capacity of central control and dashboard displays of domestic passenger vehicles increased by about 8% in the first half of 2023 compared with the same period last year. At the same time, the overall trend of the higher the price, the larger the size of the central control CID in the Chinese market in the first half of 2023. The average size of the central control CID of passenger cars in the Chinese market in the first half of 2023 is more than 10.5in, of which the average CID size of new energy passenger vehicles and fuel passenger vehicles is 13.8in and 10.2in respectively. An increase of 0.4 inch and 0.3 inch respectively over the same period last year. The company is one of the few domestic enterprises with large-scale R & D and production of OLED materials and liquid crystal materials, occupies an important position in the global display material supply system and has strong market competitiveness, and is expected to benefit from downstream demand growth.

With the smooth progress of pharmaceutical and electronic materials projects, multiple R & D reserve projects will help the company to develop the pharmaceutical sector for a long time. It is expected that GMP certification will be achieved in the API workshop in the second half of 2024. In terms of electronic materials, the company's photoresist and high-end new material industrialization project is progressing steadily. On October 23, the company's official website announced that the environmental assessment procedures for the high-end fine chemical materials industry base project (Phase II) of Dali Ruilian New Materials Co., Ltd. have begun to be handled in accordance with the norms. Downstream certification, photoresist monomer pilot batch has been verified by customers, and there are 100 kg class sales. In addition, the company has a number of reserve projects, including polyimide monomers, and with the gradual realization of mass sales in the future, it is expected to open up a new space for the company's growth.

Profit forecast and investment rating as the downstream large-size panel market is still in the stage of gradual recovery, based on the company's current operating conditions, we appropriately adjust the company's performance expectations, the company's 2023-2025 net profit is expected to be 1.46,2.53 and 338 million yuan respectively, corresponding to 31,18 and 13 times of PE respectively. The company is one of the few domestic enterprises with large-scale R & D and production of OLED materials and liquid crystal materials, occupies an important position in the global display material supply system and has strong market competitiveness, medicine, electronic materials projects proceed smoothly, optimistic about the future development of the company, maintain the "buy" rating.

Risk prompts the landing of policies, the progress of new capacity construction is not up to expectations, the contribution of new capacity is not up to expectations, raw material prices fluctuate, environmental protection policies change, and the economy declines substantially.