Event: On October 27, 2023, the company released its three-quarter report for 2023. The first three quarters of 2023 achieved revenue of 3,341 billion yuan, +3.71% year-on-year; realized net profit of 85 million yuan, -62.71% year-on-year; and realized net profit of 75 million yuan, minus 66.59% year-on-year. 2023Q3 achieved revenue of 1.12 billion yuan in a single quarter, +16.3% year-on-year and -5.15% month-on-month; net profit of the mother was 35 million yuan, -34.72% year-on-year and +103.25% month-on-month.
Film shipments have increased steadily, and profitability has been restored. In the first three quarters of 2023, the company shipped about 200 million square meters of film, and Q1/Q2/Q3 shipments were 0.62, 0.64/74 million square meters, respectively, a steady increase over the previous month. 23Q3 film achieved revenue of 668 million yuan, with an average sales price of 9.04 yuan/square meter, -28.03% year-on-year and -6.61% month-on-month; the average particle purchase price was 14.48 yuan/ton, -30.32% year-on-year and -12.6% month-on-month. The particle inventory cycle is about 1-2 months. The negative impact of high-priced particle inventories ended last year. The decline in the price of raw material particles in Q3 was greater than the decline in film sales prices, and film profits were released. We estimate that in the Q3 quarter, the company's net profit for film alone was around 0.13 yuan. Looking ahead to Q4, particle prices are still in a downward channel, and film prices may be further reduced. However, since the declining trend in particle prices is slow, we believe that the company has the ability to dynamically adjust inventory management strategies to avoid the risk of mismatch between raw materials and film prices. On the other hand, with the release of downstream N-type production capacity, the share of the company's POE film continues to rise, and the share of Q3POE film shipments has exceeded 50%; superimposed, high-margin heterojunction transfer film products continue to gain strength, and it is expected that the company's film profitability will continue to improve.
Backplane profit increased and product structure optimized. In terms of traditional backboard business, the company shipped 28 million square meters of backboard in the single quarter of 23Q3, achieving revenue of 268 million yuan. The average sales price was 947 yuan/square meter, a slight increase from Q2. The average purchase prices of Q3's PET-based film and PVDF film were 1.7 yuan/square meter and 2.55 yuan/square meter respectively, with a month-on-month difference of -34.1% and -6.6% respectively. Benefiting from the rapid decline in the prices of raw material particles such as PET and PVDF, and the increase in sales share of high-margin backboard products such as high water resistance backboards, it is expected that the profit level of the backboard business will continue to rise, and the backboard business will also become a stable source of profit for the company.
Seize the opportunities in the new technology market, and the frequent introduction of new products to help diversified development. As a technology platform enterprise, the company has strong R&D and innovation capabilities, and new products are frequently released. In the field of photovoltaics, products such as photovoltaic films, insulating strips, XBC battery wire tape, high water resistance backsheets, and high water resistance edge banding adhesives provide diverse solutions for photovoltaic module packaging. Heterojunction phototransfer film Q3 shipped about 8-9 million square meters, a significant increase from the first half of the year; TopCon and perovskite high water resistance backboards have been successfully developed and introduced; since sales of wire tape products began in June, they have achieved revenue of about 50 million yuan. In the non-optical field, the company has developed and introduced products in the electric vehicle materials, consumer electronics materials, semiconductor materials, and industrial tape business. Due to the many downstream product coverage scenarios, the company is expected to fully benefit from increased demand in various downstream markets and achieve performance growth.
Investment suggestions: In view of the continued decline in film prices, the company's revenue from 2023-2025 was reduced to 5.159 billion yuan, 7.109 billion yuan and 9.196 billion yuan (original value was 6.014 billion yuan, 8.739 billion yuan and 11.836 billion yuan), and net profit was reduced to 145 million yuan, 265 million yuan and 351 million yuan (original value was 277 million yuan, 577 million yuan and 853 million yuan), year-on-year growth of -15.2%, 82.6% and 32.3%.
The corresponding EPS is 0.33, 0.60, and 0.80, respectively, and the PE multiples corresponding to the current stock price are 50.1X, 27.4X, and 20.7X, respectively, giving it a “buy” rating.
Risk warning: capacity expansion falls short of expectations; industry competition intensifies; downstream demand falls short of expectations; risk of fluctuations in raw material prices, etc.