Incidents:

The company released its 2023 performance forecast. In 2023, it is expected to achieve net profit attributable to mother of 2300-32 million yuan, an increase of 50.58% -109.51% year-on-year, after deducting net profit of 11-15 million yuan, an increase of 4.05% -41.89% year-on-year. Among them, the estimated impact of non-recurring profit and loss on the company's net profit attributable to shareholders of listed companies during the reporting period is about 15 million yuan to 16 million yuan. The main reason is that the company reduced its holdings of Guangzhou Jusailong Engineering Plastics Co., Ltd. to obtain investment income.

Comment:

Demand for terminals is picking up, and performance is growing steadily. The company's performance achieved rapid growth in 2023, mainly due to signs of a recovery in consumer market demand for consumer devices such as consumer electronics, mobile phones, mobile terminals, and display panels. The company continued to enrich its product line, develop sales channels, expand its customer base, and strive to increase market share, achieve better sales revenue in the consumer electronics market, and increase its operating scale; at the same time, it continued to implement cost reduction and efficiency measures to optimize organizational structure and strengthen cost control. Sales expenses and financial expenses declined year-on-year, and overall profitability improved. Looking forward to the future, as a pioneer in the application of high-end materials, with the gradual recovery of the downstream consumer market, superposition companies have formed a certain competitive advantage in mobile terminals, home appliances, LED lighting, solar energy, etc., and the main business is expected to gradually grow in the future.

Actively lay out high-end manufacturing to open up room for growth. The company announced in October '23 that it has formed a deep strategic partnership with Huile Joy Machine Tool (Qingdao) Co., Ltd. to give full play to their respective advantages and share resources, and jointly cooperate in the fields of new energy, aerospace, medical devices and industrial robots. On the one hand, as an integrated solution provider for the middle and high-end chemical and electronic materials supply chain, the company has been deeply involved in this field for nearly 20 years and has accumulated many high-quality terminal customer resources; on the other hand, the controlling shareholder of Joy Machine Tools, as a world-renowned brand enterprise spanning 100 years, has accumulated deep industry experience in the fields of precision processing, professional design, and related high-end machine tool equipment customization. Relying on their respective advantages, the two are expected to fully open up the downstream market through this cooperation, accelerate their own development, and contribute to the company's second growth curve outside of its main business.

Profit forecast: As an excellent domestic enterprise for high-end materials applications, the company relies on in-depth cooperation with Huile Joy Machine Tools, and is expected to develop more downstream fields in the future and further enhance its market position. We expect the company to achieve net profit of 0.29/ 0.76/ 106 million yuan in 2023-2025, corresponding PE 70/ 27/ 18 times. The 2024 profit was given a PE valuation of 30 times, and the target price was 12.5 yuan. It was covered for the first time, and a “gain” rating was given.

Risk warning: Downstream demand falls short of expectations, profit forecasts and valuation judgments fall short of expectations.