The performance of 2023Q3 company is under pressure, the prosperity of the film industry is still low, and competition in the industry is still intense.
We are optimistic about the profit growth brought about by the release of the company's new optical and photovoltaic products. We lowered the company's 2023-2025 net profit forecast to 0.92, 4.92, and 740 million yuan, 28 times PE for 2024, gave it a target price of 16 yuan, and maintained the “buy” rating.
The 23Q3 performance was under pressure, and the revenue side was already showing signs of recovery. In 23Q1-Q3, the company achieved revenue and net profit of 39.1 billion yuan and 46 million yuan, -19%, -94%, and gross margin of 6.8%. Among them, 23Q3 achieved revenue in a single quarter, net profit of 13.5 and 017 million yuan, +5% and -35% over the previous quarter. The revenue side has achieved positive month-on-month growth, and the profit side is still under pressure.
Consumer electronics is expected to recover and the optical product structure is optimized. The Electronics Industry Group of the CITIC Securities Research Department predicts that in the third quarter, the consumer electronics industry is nearing the end of the withdrawal of stocks, will gradually begin the inventory replenishment cycle, and is optimistic about the moderate recovery trend of the industry. According to the company's 2023 semi-annual report, the company's high-smoothness MLCC release film expansion technology transformation has been completed, and the first phase of the company's MLCC production line has been put into operation to achieve supply to domestic customers. We believe that the company has achieved breakthroughs in the fields of large-scale optical films, composite films, and MLCC release films, and that the optical product structure has been gradually optimized. As consumer electronics demand gradually recovers, the company's optical business sector continues to improve.
Project construction is progressing steadily, with multiple product layouts. According to the company's official website, the company's heat shrinkable film production line 2301, high-brightness multi-layer integrated optical film workshop F1-1, and PETG film line 2302 were put into operation, and project construction is progressing steadily. At the same time, the balance of projects under construction in 23Q3 was 1.36 billion yuan, an increase of 415 million yuan over the previous year, and there are sufficient reserves for projects under construction. At the same time, according to the company's 2023 mid-year report, the company has plans to advance its enhanced PET projects, backplane projects, and composite fluid collection projects.
Risk factors: the risk that the market promotion of composite fluid collectors and customer development falls short of expectations; the recovery of downstream consumer electronics falls short of expectations, causing optical film production and sales to fall short of expectations; competition in the photovoltaic backplate substrate film industry intensifies; the penetration rate of transparent backsheets falls short of expectations; international oil prices fluctuate greatly; the company's new production capacity cannot be absorbed as expected.
Profit forecast, valuation and rating: Considering that the company's cost side is still under pressure in 2023, industry competition has intensified beyond expectations, ordinary polyester film is still dragging down profits, and the company's composite collector, MLCC release film and other products need to be released. We lowered the company's net profit forecast for 2023-2025 to 0.92, 4.92, and 740 million yuan (the original forecasts were 5.32, 8.06, and 1,117 billion yuan), and the corresponding EPS forecasts were 0.08, 0.43, and 0.64 yuan. Comparable companies Changyang Technology, Dongcai Technology, Jizhi Technology, and Jiemei Technology, Wind unanimously predicted an average PE of 36 and 24 times in 2023-2024, respectively. Considering that the company released composite fluid collectors and MLCC release films in 2024, the new business layout is expanding ahead, and the company is given a certain valuation premium. According to 2024, 28 times PE, the company's target price was lowered to 12 yuan (the original target price was 16 yuan) to maintain the “buy” rating.