Incident: On April 13, 2024, the company released its 2023 annual report & 2024 quarterly report. The company achieved revenue of 3,737 billion yuan, +2.67% year over year; net profit to mother of 329 million yuan, -20.78% year over year; deducted non-net profit of 217 million yuan, -12.80% year on year. Among them, Q4 achieved revenue of 912 million yuan in a single quarter, -2.27% YoY, -8.52%; net profit to mother of 0.23 million yuan, -67.93% YoY, -73.11% YoY; and deducted non-net profit of 331 million yuan, or -37.99% YoY and -53.02% YoY. The company achieved revenue of 921 million yuan in the first quarter of 2024, +7.26% year on month, +0.99% month on month; net profit to mother of 51 million yuan, -28.23% year on year, +121.74% month on month; after deducting non-net profit of 37 million yuan, -36.54% year on month, 19.35% month on month.

Sales volume and prices of the company's main products rebounded in the first quarter of 2024. The company's sales volume in the fourth quarter of 2023/the first quarter of 2024: New energy materials, optical film materials, and electronic materials were 1.56/1.95, 2.08/1.80, 0.85/11,500 tons, respectively, +25.28%, -13.21%, and +34.74%. The overall sales volume of major products rebounded in the first quarter; prices: prices of new energy materials, optical film materials, and electronic materials were 2.01/2.22, 1.04/1.08, 2.46/2.28 million yuan/ton, month-on-month + 10.26%, +4.04%, and -7.12%. Prices of major products also rebounded in the first quarter.

The company has built a lot of new production capacity and is optimistic about the company's long-term growth. As of the 2024 quarterly report, the company's projects under construction are about 2,074 billion yuan, including multiple production capacities in the new energy sector, electronic materials, and optical film materials, including the gradual construction of multiple optical film projects that can be used as MLCC release substrates and polarizer substrates, metallized film projects with an annual output of 5,000 tons of new energy capacitors, high-frequency high-speed resin projects with an annual output of 160,000 tons, etc. Many of these products can be replaced by domestic production, and are expected to seize the long-term growth of the company.

Investment advice: The company is a leading manufacturer of optical film materials in China. At the same time, it has laid out a variety of high-end resins to fill the domestic supply gap and has strong growth potential. We expect the company to achieve operating income of 47.93/62.93/7.192 billion yuan in 2024-2026, and achieve net profit of 4.39/6.38/797 million yuan, corresponding PE of 17.21/11.84/9.48 times, respectively, to maintain the “increase in holdings” rating.

Risk warning: Market demand falls short of expected risk; the company's newly built production capacity falls short of expected risk; competition in the same industry increases risk