Event: The company released its three-quarter report. The first three quarters of 2023 achieved revenue of 927 million yuan, a year-on-year increase of 1.91%, and net profit of 169 million yuan, an increase of 0.24% over the previous year. Compared with the semi-annual report, the growth rate changed from negative to positive, net profit after deduction of 132 million yuan, a year-on-year decrease of 15.87%, and the decline was significantly narrower than the half-year period.

Looking at a single quarter, 23Q3 achieved revenue of 345 million yuan, a year-on-year increase of 13.82%, net profit of 63 million yuan, a year-on-year increase of 14.27%, and net profit of 58 million yuan after deduction, an increase of 9.89% year-on-year. The growth rate of revenue and net profit was corrected for the first quarter of the year. The improvement in revenue and profit is mainly due to increased sales of membrane products and outsourced equipment.

In terms of profitability, the company's 23Q3 gross sales margin was about 40.18%, up 2.33 pct year on year, up 6.48 pct month on month, net sales profit margin was 18.43%, up 0.12pct year on year, and 6.15 pct month on month.

Functional film products draw a second growth curve, and automation equipment continues to break through. While the company continues to deepen its cultivation in the PCB field, it also actively pays attention to emerging industries related to its main business and has good growth, laying out the company's second growth curve in terms of functional film products, etc. While ensuring the steady growth of existing business, the company's industrial layout has developed by leaps and bounds. Mobile phone security film products are positioned in the middle and high-end markets, have domestic replacement attributes, and have been supplied in batches one after another. Vehicle light control film products currently have a high level of industry concentration in the competitive landscape, and the market share is mainly controlled by a few foreign companies. The company will seize the “window period” of rapid development of new energy vehicles, accelerate product development and marketing, actively participate in customer pre-development, prototyping and certification, and strive to achieve batch supply as soon as possible. In terms of automation equipment, the company has a full chain of independent production capacity. In addition to developing in-house tool production equipment and coating equipment to replace equipment imported from abroad, it also actively exports equipment to maintain the company's competitive advantage. Currently, the company's mature and marketable superior equipment mainly includes intelligent drill needle storage systems (including needle distribution machines, exit needles, laser marking machines, fully automatic grinders, etc.), CNC tool grinders, CNC tap grinders, fully automatic tool passivators, and CNC segment difference grinders.

Investment suggestions: We expect the company to achieve revenue of 12.98, 17.03 and 2.117 billion yuan respectively in 23-25, and net profit of 2.54, 3.42 and 438 million yuan, corresponding to PE of 34.72/25.77/20.13 times, respectively. First coverage, giving a “recommended” rating.

Risk warning: risk of macroeconomic fluctuations, risk of downstream demand falling short of expectations, risk of production expansion falling short of expectations, risk of increased industry competition