Profitability is under pressure in 2023. In 2023, the company achieved revenue of 422 million yuan, -16.29% year-on-year; realized net profit of 14.64 million yuan, or -77.60% year-on-year. Looking at a single quarter, 1Q23-4Q23 achieved net profit of 2.42 million yuan, 11.31 million yuan, 6.33 million yuan, and 5.42 million yuan, respectively. In 2023, demand for terminals such as 3C consumer electronics was insufficient and recovery was slow. Sales of the company's products declined and prices fell, while costs rose, gross margins narrowed, and profits were under pressure. The company plans to distribute a cash dividend of 1 yuan (tax included) for every 10 shares to all shareholders.

Film production and sales declined year on year, and profit per ton declined. In 2023, the company produced 38,000 tons of polyester film, -14.18% year on year; sales volume was 33,600 tons, -14.19% year over year; production and sales rate was 88.39%, relatively stable year on year. According to our estimates, in 2023, the company's single-ton film sales price (excluding tax) was about 12,135 yuan/ton, -4.18% year-on-year; net profit of single-ton film was 436 yuan/ton, -73.89% year-on-year.

Film production capacity is steadily expanding, and downstream application areas are being broadened. In 2023, the company's film production capacity is 42,000 tons, and the production capacity is 730,000 tons (including 38,000 tons of fund-raising projects and 35,000 tons of self-funded construction projects). It is expected to be completed in 2024. The additional production capacity will further enhance the ability to accept orders for products in the fields of optical film substrates, photovoltaics, and new energy. Among them, the 38,000-ton fund-raising project is expected to invest 436 million yuan. The planned production capacity includes 18,000 tons/year of functional films (colored photoelectric substrates, transparent films, and other functional films) and 20,000 tons/year of optical substrates, enriching the company's product range.

Layout the field of high-performance carbon fiber. In November 2023, the company signed a “Cooperation Framework Agreement” with Hengshou New Materials and Mr. Xiu Lei (technical team representative) to jointly engage in R&D, production and sales of M-grade graphite fibers. In December, Hexing Carbon Fiber Company completed the industrial and commercial registration procedure, accounting for 75% of the company. Graphite fiber is an irreplaceable key material for aircraft and spacecraft production. Currently, most of the global share is monopolized by a few companies in countries such as Japan and the United States. We believe that the company's entry into the carbon fiber field will help extend the new materials industry chain and create new impetus for development.

Profit forecasting and investment ratings. We expect the company's 2024-2026 net profit to be 54 million yuan, 91 million yuan and 125 million yuan, respectively, EPS 0.68, 1.14, 1.57 yuan, and BPS 18.25 yuan in 2024. Referring to comparable company valuations, according to 2024 PE 35-40 times, a reasonable value range of 23.80-27.20 yuan (corresponding to 2024 PB 1.3-1.5 times) was given to maintain the “superior to market” rating.

Risk warning: Product prices fluctuate greatly; progress of new projects falls short of expectations; prices of upstream raw materials fluctuate greatly.