Incident: The company released its 2024Q1 financial report. It achieved revenue of 67 million yuan, -11.45% year on year, net profit to mother of -14 million yuan, +34.75% year on year, after deducting non-net profit of -21 million yuan, -20.97% year on year, gross profit margin of 29.09%, and +2.74 pct year on year.
Business structure optimization and profit loss narrowing: Thanks to the growth of shielding film and the contraction of copper foil, the 2024Q1 company's business structure improved profit optimization. Shielding film increased 6.91% year on year, copper foil decreased by 28.76% year on year, and losses decreased. The overall rate for 2024Q1 was 49.20%, a sharp increase of 12.59pct over the previous year. The main reason was that management fees and R&D rates increased a lot. Among them, the increase in R&D investment was mainly due to the company's new products, technology development schedule, and customer certification schedule. Testing and trial production activities increased year-on-year during the reporting period; there is also a certain relationship between the increase in the cost rate and the decrease in the total revenue base due to the decline in copper foil business revenue. 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 business trend is improving, 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 47.17/19.67/12.87 times, maintaining the “gain” 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.