Key points of investment

Incident: The company released the 2023 Annual Report & 2024 Quarterly Report. In 2023, the company achieved revenue of 4.872 billion yuan, net profit to mother of -229 million yuan, -556% year-on-year, net profit of 245 million yuan, -963% year-on-year; of these, 23Q4 achieved revenue of 923 million yuan, -21%/-40% year-on-month, net profit to mother -153 million yuan, net profit of -84%/-272% year-on-month, net profit not attributable to mother of -147 million yuan, -57%/-18% YoY; 2024Q1 Achieved revenue of 887 million yuan, -35%/-5% year on month, net profit to mother of 0.19 million yuan, -183%/88% year on month, net profit excluding non-return to mother of 0.2 billion yuan, -192%/85% year on month. The results were generally in line with expectations.

2024Q1 shipments increased slightly month-on-month, and profits improved. The company achieved 560 million square meters of adhesive film shipments in 2023, an increase of 29% +. Of these, in 2023Q4, we expect shipment to be about 120 million square meters, a drop of about 30%. The main reason is the decline in component production schedule, the decline in profit side film prices, and the decline in gross margin compounded by more inventory impairment losses will make 2023Q4 single flat net profit about -1.3 yuan; 2024Q1 shipments declined slightly year on year and slightly month-on-month. The net profit for single flat film was about -0.17 yuan. The main reason is that the net profit for single flat film narrows. The main reason is that in January and February 2024, the net profit of single flat film narrows. Position, profit pressure, The company's shipments have shrunk. In March 2024, the price increase of adhesive film was compounded by an increase in component production schedules, and the shipping cycle more than doubled. However, in 2024Q1, the overall cost loss was still there. We expect 2024Q2 shipments to increase slightly month-on-month. Throughout the year, we expect the company to ship 7-800 million square meters of adhesive film, an increase of 20% +.

There was a slight increase in rates and a decrease in inventory during the period. The company's rate for the 2024Q1 period was about 7.9%, +2.45pct/+0.32pct compared to the same period. The rate increased mainly due to increased R&D investment combined with falling film prices and reduced revenue. At the end of 2024Q1, the company's inventory was about 640 million yuan, a decrease of 90 million yuan from the end of 2023.

Profit forecast and investment rating: Considering the intense competition in the adhesive film industry, we lowered our 2024-2025 profit forecast and added the 2026 profit forecast. We expect 2024-2026 net profit of 0.5/1.5/220 million yuan (the value before 2024-2025 was 1.6/260 million yuan), an increase of +123%/182%/48%, considering the gradual increase in the company's adhesive film shipments, expanding new materials as the second growth pole, and maintaining the “gain” rating.

Risk warning: Increased competition and policies falling short of expectations.