Incident: The company released its 2023 annual report, achieving full year revenue of 345 million yuan, +10.40% year on year, net profit of -0.69 million yuan, -0.95% year on year, after deducting non-net profit of -86 million yuan, +4.54% year on year, gross profit margin of 28.21%, and -0.67 pct year on year.
Results were in line with expectations, and quarterly results were under pressure: 23Q4, the company achieved revenue of 76 million yuan, +3.46% YoY/-22.27%, net profit to mother of -0.16 billion yuan, +14.72% /month-on-month +83.16%, net non-net profit -21 million yuan, +8.57% /month-on-month +64.46%, gross profit margin of 22.51%, year-on-year -7.74pct/month-on-month -14.69pct. Revenue in a single quarter was stable year over year, but profit loss increased month-on-month. Gross margin both declined month-on-month, and expense ratios also increased significantly during the period (+8.88pct/month-on-month +6.68pct). With the company's diverse platform capabilities and layout, various electronic materials are expected to gradually blossom and form important performance contributions in the future.
Diversified materials ushered in growth opportunities: Shielding film: Global demand for consumer electronics declined in 2023, sales of the company's high-end products increased significantly, and the mobile phone market is expected to see a recovery in 2024 leading to a recovery in the company's shielding film revenue and profit. Copper foil: Competition in the industry intensified in 2023, and the company reduced costs, increased efficiency and narrowed losses. A model of high-end peelable copper products completed major customer certification and received sample orders, and PET copper foil passed downstream certification and received small orders in the communications field. FCCL: Gradual certification and order was obtained in 2023. Part of the second phase production line is expected to be put into operation in 2024Q2, with a total production capacity of 325,000 square meters per month. Resistance film: In customer certification, some customers have completed factory audits and have received small-batch orders.
Investment advice: The company's performance is in line with expectations, various high-end materials are progressing smoothly, and future performance is expected to blossom more. We expect the company's 2024-2026 net profit to be 0.44/1.06 billion yuan, EPS 0.55/1.31/2.00 yuan/share, corresponding PE 48.63/20.28/13.27 times, maintaining the “increase” rating.
Risk warning: risk of further decline in demand for shielding film; risk of industrialization of high-end materials such as peelable copper falling short of expectations; risk of rising raw material prices.