Event: the company released a report on the third quarter of 2023, saying that in the first three quarters of 2023, the company realized revenue of 1.539 billion yuan, down 7.40% from the same period last year; realized net profit of 58 million yuan, down 68.81% from the same period last year; and deducted 42 million yuan from non-net profit, down 74.83% from the same period last year. From a quarterly point of view, Q3 company achieved revenue of 567 million yuan in 2023, down 0.53% from the same period last year, up 3.73% from the same period last year; realized net profit of 34 million yuan, down 31.27% from the same period last year, and increased by 193.78%; and realized deduction of 30 million yuan from non-net profit, down 24.43% from the same period last year and an increase of 294.78% over the previous year.

Capacity utilization continued to rise, Q3 non-month-on-month increased significantly: the company's product line capacity utilization showed an upward trend, deducting non-net profit increased significantly. In the first three quarters of 2023, the company's comprehensive gross profit margin was 14.22%, down 7.56 pcts from the same period last year; the net profit margin was 3.82%, down 7.79pcts from the same period last year. In terms of expenses, in the first three quarters of 2023, the company's sales, management, R & D, and financial expense rates were 0.56%, 3.47%, 6.00%, 0.50%, respectively, and the year-on-year changes were-0.15/+0.30/+0.40/-0.01pcts. Among them, the company's financial expense rate and absolute value decreased in the first three quarters compared with the same period last year, mainly due to the reduction of interest expenses.

The production capacity of polarizer has been expanded in an orderly manner, and the achievements of product innovation have been accelerated: according to the company's announcement, the company has changed the construction content of "Hefei Sanlipu Phase II TFT-LCD polarizer production Line Project" to the construction of a full-width 1720mmTFT-LCD polarizer production line, with an annual output of about 30 million tons after the completion of the project. 1720mm wide-width polarizer production line is the first in China to use large-size TV polarizer, which will further enrich the company's product structure, improve production efficiency and economies of scale, and reduce the company's cost. In 2022, the company Putian annual capacity of 6 million square meters polarizer production line project is completed, entering the trial production phase, this production line is planned for the production of vehicle TFT display polarizer, capacity utilization is expected to increase in an orderly release this year; according to the company's September 28 investor interaction, the company's Putian factory in the car polarizer business, internal verification has been raised to 95 ℃ 1000H, and has arranged to send samples to customer verification.

Vehicle + VR new products continue to break through, and dual business engines enable profits to improve: according to RUNTO's forecast, VR shipments will exceed 10 million units for the first time in 2023, reaching 12.7 million units, an increase of 40% over the same period last year. The company is the optical film supplier of mainstream VR products in the domestic market, and has accumulated relevant technical reserves in the field of VR folding optical film products. At present, the company's VR product client certification has been basically completed, and the VR head display folding optical path polarizer has been mass-produced. As the company continues to deepen the layout of the VR field, the future is expected to fully benefit from the volume of the VR industry. In terms of on-board business, according to the passenger car market analysis report released by the Federation of passengers, the penetration rate of new energy passenger vehicles will reach 27.6% in 2022, an increase of 12.6pcts compared with 2021, and the penetration rate of new energy vehicles will still increase rapidly in the future, and it is expected that the penetration rate of new energy passenger vehicles will reach 36% in 2023. With the continuous improvement of the permeability of new energy vehicles, the market has put forward new requirements for the high temperature resistance of on-board products. At present, the company's vehicle iodine polarizer has been stabilized at 95 ℃ × 500H, and mass production has been achieved in the rear-loading vehicle market; the company's vehicle dye products have also been supplied in small quantities. With the continuous breakthrough of on-board products and the continuous improvement of the penetration of new energy vehicles, the company is expected to make a profit by repairing the vehicle business and further open up long-term growth space.

Maintain "buy" rating: the company is a leading manufacturer in the field of domestic polarizers. In recent years, the company has continuously built new production lines to increase production capacity, improve supply stability and product quality, and expand product categories. It has been widely recognized by domestic mainstream LCD panel factories and large module factories, which has laid a solid foundation for the company to achieve long-term performance growth. Since 2022, the company's polarizer production capacity has been expanded in an orderly manner, and its business has been extended to the optical film and polymer upstream of the polarizer, and the vehicle and VR business has achieved mass production. Looking to the future, with the rebound of consumer electronics demand, the sustainable development of the new energy vehicle industry, the continuous expansion of the company's polarizer production capacity and the continuous promotion of the integrated layout of the polarizer, the company is expected to gradually repair its profitability and further improve its profitability. It is estimated that the return net profit of the company from 2023 to 2025 is 128 million yuan, 285 million yuan and 416 million yuan respectively, the EPS is 0.73,1.64 yuan and 2.39 yuan respectively, and the PE is 44x, 20x and 13x respectively.

Risk hints: product single risk, raw material supply concentration and price fluctuation risk, main business gross profit margin decline risk, macroeconomic fluctuation and policy change risk.