Description of the event
In 2023, the company achieved revenue of 1.97 billion yuan (+4.9% YoY), realized net profit of 60 million yuan (-66.6% YoY), and realized non-net profit of 40 million yuan (-72.0% YoY). With 2024Q1, the company achieved revenue of 660 million yuan (+37.4% year over year), realized attributable net profit of 19 million yuan (-7.7% year over year), and realized non-net profit of 0.5 billion yuan (-67.1% year over year). In 2023, the company will pay a cash dividend of 0.20 yuan (tax included) for every 10 shares.
Incident comments
The company opens up development boundaries as a leader in functional coating composites and expands horizontally and vertically. The company's main products are divided into functional film materials, electronic grade adhesive materials, polymer film materials, thermal management composites and film packaging materials, which are used in key fields such as consumer electronics, new displays, new energy vehicles, household appliances, and ceramic capacitors. The company continues to expand in new categories, focusing on OCA adhesives and coatings, precision release films, upstream PET base films, homemade glues, etc., and continues to enhance the company's core competitiveness.
Asset consolidation is compounded by rising costs, putting pressure on 2023 results. Since 2023, demand for terminal consumer electronics has slowly recovered, but the company has put into production a large number of new projects one after another, and revenue has basically achieved a steady growth trend. Due to several factors, annual performance was under pressure. 1) The transformation of new projects brought about a significant increase in depreciation and amortization: major construction projects such as the OCA optical adhesive project, precision release film project, glue supply system technology transformation project, and PET optical film project line 2 were completed and transferred to fixed assets one after another, and depreciation expenses increased sharply year-on-year during the reporting period; 2) Financial cost impact: Some major construction projects were completed and transferred to fixed assets. The project changed from capitalization to cost, and financial expenses rose sharply year-on-year; 3) R&D and manual expenses increased sharply year on year; 3) R&D and manual expenses rose sharply year on year; 3) R&D and manual expenses rose sharply year on year; 3) R&D and manual expenses rose sharply year on year; 3) R&D and manual expenses rose sharply year on year; 3) R&D and manual expenses rose sharply year on year; 3) R&D and manual expenses rose sharply year on year; 3) R&D and manual expenses rose sharply year on year; 3) R&D and manual expenses rose sharply year on year; 3) R&D and manual expenses rose sharply year on year; 3) R&D and manual expenses rose sharply year on Expenses Impact: The company continues to invest heavily in R&D, technology platforms, information transformation, and sales. Coupled with the construction of new projects and new workshops, labor costs increased rapidly, and R&D expenses and labor costs increased sharply year-on-year during the reporting period; 4) Impact of non-recurring profit and loss: The impact of non-recurring profit and loss on net profit in 2023 was about 16.106 million yuan. Looking ahead, due to rising component prices and declining channel inventory levels, orders and profits in the smartphone supply chain are picking up. Combined with the company's continued volume in the fields of folding screens, AR/VR, new energy vehicles, and MLCC release films, the business format is expected to gradually pick up.
Projects under construction continue to advance, and there is plenty of room for the future. The company raised capital through IPOs and fixed increases to invest in various projects. Currently, the OCA fund-raising project, PET base film line 1/2, and precision release film coating projects have been successfully put into operation. Projects such as functional tape, polarizer protective film, and PET base film line 3 are in the process of being promoted, and will gradually be put into production in the future to increase the company's profits.
OCA optical adhesives have a wide range of local alternatives. According to estimates of demand in various fields such as downstream OCA smartphones, tablets, PCs, in-vehicle displays, and wearable devices, the global OCA adhesive market is close to 10 billion yuan. Along with a sharp increase in the value of stand-alone OCA optical adhesive for folding screen phones and a rapid increase in expected shipments of folding screen phones, it is expected to bring a new round of growth opportunities to the OCA optical adhesive market. The company continues to release electronic grade adhesive materials such as OCA optical adhesive, OCA explosion-proof film, anti-impact protective film, dustproof film, etc., and electronic materials for new energy vehicles, and the product structure is continuously upgraded and optimized.
The company is at the leading level in the field of new adhesive materials and functional films. The amount of OCA glue released and the localization of high-end release films opens up space for future development. The estimated net profit for 2024-2026 is $1.3/27/4.9 billion. Maintain a “buy” rating.
Risk warning
1. The recovery in downstream demand fell short of expectations;
2. The progress of the new project is lower than expected.