Sanli Pu released the operating data report for the first three quarters of 2023: the company achieved revenue of 1,539 billion yuan in the first three quarters of 2023, a year-on-year decrease of 7.40%; net profit of 58 million yuan, a year-on-year decrease of 68.81%. According to calculations, the company achieved revenue of 567 million yuan in the Q3 quarter of 2023, an increase of 3.7% over the previous month; net profit was 34 million yuan, an increase of 193.8% over the previous month.

Key points of investment

Increased capacity utilization, improved performance in a single quarter

The company's capacity utilization rate increased in the third quarter. Data up to the end of September showed that the capacity utilization level was better than in the first half of the year; the gross margin for the third quarter was 15.1%, an increase of 1.8 pct over the previous quarter. Expense control is reasonable. Sales/management/R&D expenses for the third quarter were 0.52%/3.53%/5.79% respectively, with year-on-year changes of -0.04/+0.18/+0.35pct, respectively. In the third quarter, the company's profit improved markedly month-on-month, achieving net profit of 34 million yuan, an increase of 193.8% over the previous month; non-net profit withheld by the mother of 30 million yuan, an increase of 294.8% over the previous month.

The ultra-wide polarizer project started in Huanggang, and the release of production capacity is expected to contribute to performance growth

On September 14, 2023, the company's ultra-wide polarizer project commencement event was held. The project is to be built in two phases. The first phase will build a 1,720mm wide production line and an ultra-wide 2520mm production line. It is expected to be completed and put into operation in early 2025, and production will be completed by the end of 2025; the content of the second phase of construction is consistent with the first phase. Overall, after delivery, the estimated annual production of polarizers is 140 million square meters, with an annual output value of about 10 billion yuan.

The company currently has four major production bases: Shenzhen ****, Shenzhen Longgang, Anhui Hefei, and Fujian Putian. **** and Hefei Phase I, Longgang, Putian, and Hefei Phase II have annual production capacity of 22 million, 10-15 million, 6 million and 30 million square meters, respectively. The completion of the Huanggang project will bring about a significant increase in production capacity, and the gradual release of production capacity is expected to contribute to increased performance.

The new business is progressing smoothly. Focus on the pace of in-vehicle and VR volume

The company continues to increase the level of research and development to achieve steady progress in new business. The company is mass-producing and developing different types of automotive polarizer products. Internal verification has been raised to 95℃ 1000H, and customers are arranging for samples to be sent for verification. The company's OLED products have been shipped on wearable devices and are actively promoting mass production of AMOLED clients. As the automotive and VR businesses continue to expand, it is expected to become a new engine driving the company's performance growth.

Profit forecasting

It is predicted that the company's revenue for 2023-2025 will be 22.83, 31.68, and 4.343 billion yuan, and EPS of 0.77, 1.40, and 2.31 yuan respectively. The current stock price corresponding to PE is 41, 22, and 14 times, respectively. We are optimistic about the increase in the company's capacity utilization rate and the increase in performance brought about by the release of production capacity in the Huanggang project, giving it an investment rating of “increased holdings”.

Risk warning

Downstream customer demand falls short of expectations, production expansion projects are not progressing as expected, risk of product price fluctuations, etc.