Incident: The company released its 2023 annual report, with revenue of 3.88 billion yuan, +1.14%; net profit to mother of 1,024 million yuan, +1.72% year on year; deducted non-net profit of 999 million yuan, +2.47% year on year; of which 2023Q4 revenue was 1.08 billion yuan, -1.1% year on year; net profit from single quarter was 310 million yuan, -1.85% year on year; single quarter deducted non-net profit of 271 million yuan, with significant cost advantages in R&D investment. The company has been deeply involved in the film capacitor industry for more than 50 years. During this period, it continued to promote independent product R&D and innovation and establish integrated core competitiveness in research, production and marketing, and has a stable leading position in the industry market. In 2023, the company's gross margin was 37.48%, up 0.59 percentage points year over year. In 2023, the company spent 141 million yuan on R&D, an increase of 6.02% over the previous year; the R&D expenditure ratio was 3.64%, an increase of 0.17 percentage points over the previous year. The increase in R&D expenses helps accelerate the iteration of core technology and achieve an increase in the capacity density of film capacitor products, thereby increasing product profits.

The NEV business is growing well, and the PV business may return to a normal growth curve in 24 years. Currently, the company's largest business segments are new energy vehicles and photovoltaics, which account for about 40% and 30% of the company's total revenue, respectively. The NEV business is currently growing well globally. The increase in new vehicle sales and penetration rate is stable. It is predicted that global NEV sales may reach 25 million units in '25, corresponding to a CAGR of 31%. It is expected that the automotive film capacitor industry will maintain a growth rate of 30%-40% in 24/25. In terms of the photovoltaic business, the rapid growth trend continued in the first half of 2023, and demand slowed in the second half of the year. We believe that the growth rate of new installed capacity will return to a normal curve after 24 years, and the photovoltaic film capacitor industry may maintain a growth rate of 25%-30% in 24/25.

Actively plan to expand production capacity related to new energy sources and target the global market. In recent years, with advantages such as long life span, high voltage resistance, and adaptation to high frequencies, the new energy market has grown rapidly. Currently, it continues to increase capital and expand production, introducing advanced international production equipment in the newly built factory area, and undertakes R&D and manufacturing of new energy products such as new energy vehicles, photovoltaics, wind power, and smart grids. It is scheduled to be completed and put into use in June 2026. In 2024, the company will focus on research and development of high-volume, high-temperature capacitors for new energy vehicles, maintain steady revenue growth, strive to control costs and expenses, continue to consolidate traditional market share, and further develop the global NEV market, rail transit market, and power grid market.

Investment advice: We expect the company to achieve revenue of 50.76/63.71/7.08 billion yuan in 2024-2026, net profit of 13.29/16.19/1,781 billion yuan, EPS of 5.91/7.20/7.92 yuan respectively, and PE 17/14/13 times, giving it a “recommended” rating.

Risk warning: Raw material prices fluctuate, market competition intensifies, and downstream demand falls short of expectations.