Incident: Guangxin Materials issued an announcement stating that it has received the “Hazardous Chemical Construction Project Trial Production Plan Receipt” issued by the Longnan Municipal Emergency Management Bureau. The Longnan Municipal Emergency Management Bureau has agreed to the “9000t/a outer ink” trial production plan for the company's fund-raising project “50,000 tons of electronic photosensitive materials and supporting materials”. The trial production period is from March 1, 2024 to September 1, 2024.
The fund-raising project is gradually being implemented, and profitability is expected to increase: the trial production plan was approved to provide the basis for the company to quickly start production of PCB photoresists and more products such as PCB solder mask ink and PCB circuit ink (wet film photoresist). It is expected that after the overall project is delivered, it will further enrich the industrial layout of the company's products in materials related to PCBs, displays, semiconductors, photovoltaics, consumer electronics, new energy vehicles, functional films and metal packaging. At the same time, the base will also develop the ability to supply its own resin after delivery, which is expected to effectively reduce the cost of raw materials for the company's main products and further enhance the company's long-term profitability.
The revenue recovery trend in 2023 is beginning to show, and downstream demand is expected to continue to be released: the company previously released a performance forecast and is expected to achieve revenue of 500-550 million yuan in 2023, up 0.43%-10.47% year-on-year, and resume positive growth; net profit to mother of 600-9 million yuan, reversing year-on-year losses. The company's forecasted revenue was in line with previous expectations. The main reason the net profit fell short of expectations was the accrued goodwill impairment of about 28 million yuan, while a net profit of about 10 million yuan has not yet been confirmed due to lawsuits. If these two parts are added back, the corresponding net profit attributable to the mother is about 44-47 million yuan. The improvement in the company's performance mainly benefits from photovoltaic products such as photovoltaic adhesives and functional films, as well as NEV products such as metal packaging coatings. Among them, the company's photovoltaic insulating adhesive products have achieved sales and rapid growth in downstream solar photovoltaic cell module companies. It is expected that the amount of BC batteries released in 2024 will drive the rapid growth of the company's photovoltaic products; the rapid growth trend of new energy vehicles continues, and the company's coating business is also expected to benefit from this trend.
Investment advice: The company's product sales are expected to rebound to bottom out in 2024. Therefore, we expect the company's revenue in 2023-2025 to be 5.36, 7.77, and 1,029 billion yuan respectively, net profit to mother of 0.07, 0.90, and 153 million yuan, respectively, and EPS of 0.04, 0.46, and 0.79 yuan respectively. Maintain a “buy” rating.
Risk warning: The macro environment falls short of expectations, product application falls short of expectations, and market competition intensifies.