Events:

The company released its three-quarter report in 2023, with operating income of 2.497 billion yuan in the first three quarters, an increase of 5.02% over the same period last year, and net profit of-31 million, an increase of-150.39% over the same period last year, deducting non-return net profit of-43 million, an increase of-191.56% over the same period last year. The operating income in the third quarter was 916 million yuan, an increase of 17.49% over the same period last year and 11.3% month-on-month.

The copper clad laminate industry is gradually picking up, and its operation is up month-on-month in the third quarter:

In the first half of 2023, the industry is affected by the lack of terminal demand, resulting in weak growth at the supply end, but the electronic and circuit industry will still maintain a steady structural growth trend. According to the China Association of Automobile Manufacturers, car sales in the first half of 2023 were 13.239 million, up 9.8% from the same period last year; according to Canalys, global smartphone shipments totaled 524 million units in the first half of 2023, down 12.8% from 601 million units in the first half of 2022, while Q3 fell only 1%. The decline has slowed. According to PCB information network information, since the third quarter, Kingboard, Willie Bond, Shandong Jinbao and other companies have issued price increase notices one after another. As the industry bottomed out and the demand for copper clad laminate gradually picked up, the company's operating income in the third quarter was 916 million yuan, an increase of 17.49% over the same period last year, an increase of 11.3% from a month earlier, and its gross profit margin in the third quarter was 10.96%, an increase of 9.85% over the second quarter.

The CBF grass-roots insulating film business is advancing in an orderly manner and is expected to become the second growth curve:

The substrate materials for IC packaging are divided into laminated insulating film and BT resin. Laminated insulating plastic film packaging carrier board is mainly used in IC packaging with thin lines, such as FC-BGA, which is suitable for high pin number and high transmission, including CPU, GPU, FPGA, ASIC and other high performance chips. According to QYR data, the global market for grass-roots insulating plastic film carriers will reach US $4.856 billion in 2022 and is expected to reach US $6.981 billion in 2029, with an annual compound growth rate of 6.24%. The company continues to increase investment in semiconductor packaging materials, focusing on technological breakthroughs and industrial layout. The company's semiconductor packaging materials include BT packaging materials and CBF laminated insulating films, which are suitable for advanced packaging processes such as Chiplet and FC-BGA, among which CBF laminated insulating films are in urgent need of imported substitute materials.

According to the company's reply on the investor relations platform on September 14, the company has formed a series of products in application scenarios such as ECP embedded technology and computing chips, and carried out verification among important end customers and downstream customers, and some products have entered the stage of small batch order delivery, which is expected to become the company's second growth curve.

The production of aluminum-plastic film is expanded smoothly, and it is expected to increase gradually:

Aluminum-plastic film is the key material of lithium battery core soft package packaging, and it is a technically difficult link in the field of lithium-ion battery materials. at present, the main suppliers of global and domestic high-end aluminum-plastic film market are a small number of overseas enterprises, such as DNP and Showa Electric. With the continuous development of lithium battery industry, a variety of application scenarios, such as new energy vehicles, energy storage, consumer electronics, light power and so on, will bring considerable incremental space for aluminum-plastic film. According to the company's 2023 semi-annual report, the company's annual output of 3600 million square meters of lithium battery packaging aluminum-plastic film project is in the trial production stage, with batch product supply capacity. The company has achieved volume growth in the high-end 3C field represented by black matte aluminum-plastic film; significant progress has been made in the research and development of high-durability and high-impact aluminum-plastic film in the field of energy storage and power; the field of small power battery has been supplied in batches, product verification has been carried out continuously in the field of power battery, and some customers have completed core-level testing.

Investment suggestion: we estimate that the company's income from 2023 to 2025 will be 3.545 billion yuan, 4.114 billion yuan and 4.791 billion yuan respectively, and the net profit will be-7 million yuan, 252 million yuan and 336 million yuan respectively. Considering the gradual recovery of the copper clad laminate industry, we will give it 27 times PE in 2024, corresponding to the 12-month target price of 47.92 yuan, and give the "Buy-A" investment rating for the first time.

Risk tips: the prosperity of the industry is not as good as expected; product development is not as expected; market development is not as expected.