The company's revenue continued to grow in 2023. In 2023, the company achieved operating income of 3,737 billion yuan, a year-on-year increase of 2.67%, net profit to mother of 329 million yuan, a year-on-year decrease of 20.78%, and net profit after deducting net income of 217 million yuan, a year-on-year decrease of 12.80%. In the first quarter of 2024, the company achieved operating income of 921 million yuan, a year-on-year increase of 7.26%, a year-on-year net profit of 51 million yuan, a year-on-year decrease of 28.23%, and net profit after deduction of 37 million yuan, a year-on-year decrease of 36.54%. Demand in the global consumer goods market was poor in 2023, commodity prices entered a downward cycle, and the contradiction between supply and demand for production capacity in the chemical supply chain was prominent, and homogenized competition intensified. As a result, product prices in the company's traditional application fields fell markedly, and profitability was under pressure in the short term.

The company's key projects continue to advance, and epitaxial development enhances core competitiveness. In 2023, the company successfully completed trial production work for various industrial projects such as the “Special Functional Polyester Film Project”, “Optical Grade Polyester Base Film Project with an Annual Output of 20,000 Tons of New Display Technology”, “High Performance Polyester Substrate Film Project for MLCCs and PCBs with an annual output of 20,000 tons”; the “Optical Grade Polyester Substrate Film Project for Polarizers with an annual output of 25,000 tons” and the “Optical Grade Polyester Base Film Technology Transformation Project for Ultra-thin MLCC with an annual output of 20,000 tons”, etc., which is basically in line with expectations. The company set up a joint venture with South Korea's Chemax and Chongyi Chemical in Chengdu, Sichuan to focus on the synthesis and purification of high-end photoresist materials to build an upstream and downstream collaborative industrial chain in the photoresist field; signed a “Strategic Cooperation Framework Agreement” with Shanjin Optoelectronics and Yangzhou Wanrun to accelerate domestic replacement projects for PET base films for polarizers and release films for polarizers.

In 2024, the company will continue to advance project construction to cultivate new momentum for the company's performance growth. In 2024, the company will focus on improving the capacity utilization rate and product stability of the newly built production line to ensure that the “Special Functional Polyester Film Project”, the “Optical Grade Polyester Base Film Project with an annual output of 20,000 tons for new display technology”, and the “High Performance Polyester Base Film Project for MLCC and PCB with an annual output of 20,000 tons” release high-quality production capacity; at the same time, actively promote the “Dongcai Technology Chengdu Innovation Center and Production Base Project”, the “Optical Grade Polyester Base Film Project for Polarizers with an annual output of 25,000 tons” and the “Optical Grade Polyester Base Film Project for Polarizers with an annual output of 20,000 tons”” etc Construction progress of industrialization projects.

Profit forecasting and investment ratings. Due to increased competition, the prices of products in traditional applications have declined, and we have lowered our performance. We expect the company's 2024-2026 net profit of 391 million yuan, 528 million yuan, and 620 million yuan (the original 2024-25 was 6.96 million yuan and 832 million yuan), corresponding to EPS of 0.43 yuan, 0.58 yuan, and 0.68 yuan. Referring to the valuation of comparable companies in the same industry, we believe that the reasonable valuation is 25 times PE in 2024 (originally 28x in 2023), and the target price is 10.75 yuan (-29%), maintaining an superior market rating.

Risk warning: Production expansion projects fall short of expectations; downstream demand falls short of expected risk.