Description of the event

Haiyou New Materials released its 2023 three-quarter report. In the first three quarters of 2023, it achieved revenue of 3,949 billion yuan, a year-on-year decrease of 4%; net profit of net income of 75 million yuan; of these, 2023Q3 achieved revenue of 1,549 billion yuan, an increase of 18% over the previous year, an increase of 48% over the previous year; and net profit of the mother of the year - 41 million yuan.

Incident comments

Looking at the 2023Q3 quantitative profit split, we expect the company's Q3 film sales to increase significantly from month to month. Thanks to the improved schedule of component production from August to September, the recovery in the company's shipment volume was remarkable. Looking at profit levels, we expect that 2023Q3 net profit has reversed losses compared to actual operating performance in Q2. Among them, it is expected that there will still be a lot of pressure in July, and there will be a recovery in August/September.

In terms of other data, the company experienced asset impairment losses of $80 million in Q3. The main reason was the sharp drop in the price of EVA particles at the end of September. The company prepared for inventory price declines based on the principle of prudence. The company's cost rate for the Q3 period was 5.5%, down 1.2 pct from month to month. Response expenses were well controlled. Inventory at the end of Q3 was 950 million, down 16% from the previous month.

Looking ahead to the future, we believe that in the context of fierce competition in the film industry, the company's profitability is expected to gradually recover from the difficult situation through the optimization of product structure, cost control, and production capacity in Southeast Asia. At the same time, the company has begun to lay out businesses such as automotive smart glass film materials and surface materials. Recently, progress has been relatively smooth. 2024-2025 is expected to contribute revenue and bring new performance growth points.

We expect the company to achieve profit of 250 million yuan in 2024, corresponding to PE 24 times, and maintain the “buy” rating.

Risk warning

1. The competitive pattern deteriorated;

2. PV installation falls short of expectations.