Key points of investment

The company disclosed its 2023 annual report and 2024 quarterly report: total operating revenue/net profit to mother of $840/106 million yuan in 2023, with a year-on-year increase of +31.7%/+66.1%, of which 2023Q4/2024Q1 achieved total revenue of 248/223 million yuan, +39.3%/+46.4% year-on-year respectively, and achieved net profit of 2690/28.67 million yuan, respectively.

Demand continues to be high, and strong production and sales of vacuum insulation panels continue to drive high revenue growth. (1) The company achieved 8.82 million square meters of vacuum insulation board sales in 2023, +35% over the same period. Revenue continued to grow rapidly in 2023Q4/2024Q1, mainly due to the increase in energy efficiency standards for refrigerators in the European Union and other places, and the combined volume of high-end refrigerators such as volume and built-in volume. Global refrigerator companies' demand for vacuum insulation boards continued to grow, and the company's vacuum insulation board production and sales were strong. (2) The gross margin for the 2023Q4/2024Q1 quarter was 31.7%/34.6%, respectively, up 1.5/4.8pct year-on-year, mainly due to the year-on-year decline in raw material costs such as glass fiber and energy costs such as natural gas, and the increase in capacity utilization. The month-on-month increase in Q1 gross margin is expected mainly due to falling natural gas prices.

The cost side is well controlled, and the debt ratio is rising due to increased bond transfers and capital expenditure. (1) The company's expense ratios for the 2023Q4/2024Q1 period were 16.1%/18.7%, respectively, +1.7/-0.6pct, respectively. Among them, the 2023Q4/2024Q1 financial expense ratio increased by 2.5 pct/2.2 pct year on year due to the issuance of convertible bonds. Furthermore, 2023Q4 sales, management, and R&D expenses rates remained flat at -0.1/-0.7 pct year on year, respectively. The 2024Q1 sales, management, and R&D expenses rates were respectively -1.1/-0.9/-0.8 pct year on year, which is expected to benefit from revenue The scale effect of high growth. (2) The net cash flow from the company's 2023Q4/2024Q1 operating activities was 2132/28.8 million yuan, respectively, and is expected to be mainly affected by differences in repayment rhythms during the same period. The cash payments for the purchase and construction of fixed assets, intangible assets and other long-term assets in 2023Q4/2024Q1 were 1.47/089 million yuan, respectively, +570%/+215% year-on-year, reflecting the accelerated expansion of the company's vacuum insulation board production, which is expected to ease current production capacity bottlenecks and support continued high production and sales growth. (3) The balance ratio reported for the first quarter of 2024 was 41.2%, an increase of 21.4pct over the previous year, mainly due to the company's increased capital expenditure, issuance of convertible bonds, and additional long-term loans.

New production capacity for vacuum insulation panels has entered the release period, and the company continues to develop and consolidate technical advantages and broaden downstream applications. (1) The company vigorously promoted production efficiency, achieved quarterly increases in production and sales in 2023, and promoted equipment investment and transformation in Liancheng and Feixi. Additional production capacity will be gradually released from March 2024. The high demand boom and production capacity release are expected to support the rapid growth of the main business. (2) The company actively explores production methods and process improvements, develops various core products, and carries out R&D such as metal VIP, etc., which is expected to further expand applications in downstream markets such as construction and medicine.

Profit forecast and investment rating: The company is a provider of systematic solutions and a leading vacuum insulation board company in the field of vacuum insulation and energy saving. It is deeply involved in major downstream customers, continuously promotes product and process iteration, broadens vacuum insulation board application scenarios, and cultivates new products of vacuum glass. Based on the improvement in gross margin, we raised the company's 2024-2025 net profit forecast to be 167 million yuan and 237 million yuan (previous value: 165 million yuan/234 million yuan), and added the 2026 forecast to 316 million yuan. The price-earnings ratios corresponding to the closing price on April 30 were 21 times, 15 times, and 11 times respectively, maintaining the “buy” rating.

Risk warning: the risk that raw fuel costs will rise more than expected, the penetration rate of vacuum insulation panels will not grow as expected, and the construction and application promotion of vacuum glass production lines will fall short of expectations.