Profitability increased month-on-month, 23Q3 net profit increased 103.25% month-on-month 2023Q1-Q3, and the company achieved operating income of 3,341 billion yuan, an increase of 3.71% over the previous year; net profit of 85 million yuan, a year-on-year decrease of 62.71%; net profit after deduction of 75 million yuan, a year-on-year decrease of 66.59%. In 2023Q3, the company achieved operating income of 1,120 billion yuan, a year-on-year increase of 16.30%, a decrease of 5.15%; net profit of 35 million yuan, a year-on-year decrease of 34.72%, an increase of 103.25% over the previous year; net profit after deduction of 33 million yuan, a year-on-year decrease of 33.68%, a year-on-year increase of 199.68%. Prices of major photovoltaic raw materials such as silicon materials and silicon wafers fluctuated greatly in the first half of this year. In the second quarter, silicon prices entered a downward channel, and downstream module manufacturers controlled module production, leading to a decrease in film procurement volume at the industry level and lower film prices; in the transportation and electrical materials business, new energy vehicle terminals were removed from inventory in the first half of this year, leading to a decrease in demand in the first half of the year; in addition, investment in R&D expenses in the first three quarters increased a lot compared to the same period last year, leading to a decline in net profit.

PV film shipments continued to grow, with N-type module film shipments surging into 2023Q3. The company achieved sales volume of PV film reaching 74 million square meters, an increase of 15.06% over the previous month; corresponding revenue was 668 million yuan, with an average sales price of 9.04 yuan/square meter. The company is speeding up the shipment of encapsulation films for N-type TopCon components. As one of the main manufacturers of TopCon, the company has become its main supplier through all-round cooperation with the two manufacturers mentioned above. For N-type HJT modules, the company's phototransfer film products are the only domestic manufacturers that have achieved mass production and delivery. The number of supply customers has expanded from Huasheng New Energy to 5, while the number of customers currently being tested and nearing the end of testing covers almost all HJT component manufacturers in the world.

Adhering to a diversified platform-based development strategy, the non-photovoltaic materials business is gaining momentum. The company's non-photovoltaic materials business mainly includes electric vehicle materials, consumer electronics materials, semiconductor materials, industrial tape, etc. In the electric vehicle materials business, new energy vehicle terminals are removed from inventory, leading to a decrease in demand, while downstream cost reduction demand is transmitted to upstream materials; in the consumer electronics materials business, the introduction of new products is progressing smoothly, and sales are expected to increase with the gradual release of additional production capacity. In the semiconductor materials business, the company achieved batch shipment of UV adhesive tape for packaging substrates in the first half of the year, and non-bounded BG tape products were the first in China to enter the trial production stage. In terms of industrial tape, the company's PET double-sided tape is mainly used for battery cell cushioning material bonding. Major customers include Ningde Shidai, BYD, etc., and stable delivery was achieved in the first half of the year.

Profit forecasting and valuation

Lower the profit forecast and maintain the “buy” rating. The company is a leader in photovoltaic film and backsheets, and the non-photovoltaic business is expected to create a second growth curve. Considering the impact of large fluctuations in raw material prices, the company's photovoltaic film shipments and profits fell short of expectations. We lowered the company's profit forecast. It is estimated that the net profit of the company from 2023-2025 will be 1.48, 2.53, and 350 million yuan (484 million yuan, 708 million yuan, 919 million yuan respectively before the reduction), with a year-on-year difference of -13.83%, +71.40%, and +38.43%, corresponding to EPS of 0.34, 0.57, and 0.80 yuan, respectively, corresponding to PE of 46, 27, and 20 times.

Risk warning

PV installation demand falls short of expectations; raw material prices fluctuate; and shipments of photovoltaic film products fall short of expectations.