The company achieved net profit of 107 million yuan after deduction from mother in '23, an increase of 85.9% over the previous year

The company released its annual report for the year 23 and the quarterly report for '24. It achieved revenue/net profit of RMB 84/106 million, up 31.7%/66.1% year on year, net profit after deducting net profit of RMB 107 million, up 85.9% year on year. Of these, 23Q4 achieved revenue/net profit up 39.3%/15.4% year on year, net profit after deducting net profit of RMB 27 million, up 21.6% year on year; achieved revenue/net profit to mother of RMB 2.23/0.29 billion yuan in the first quarter of '24, up year on year 46.4%/152%. Net profit after deducting non-return to mother was $0.27 billion, an increase of 152% over the previous year.

Demand for downstream refrigerators is booming, and new production capacity is expected to gradually increase

The company achieved vacuum insulation board revenue of 82 billion yuan in 23 years, an increase of 32.23% over the previous year. Demand for vacuum insulation panels by downstream refrigerator companies remained high. As energy efficiency standards for refrigerators in developed countries and regions gradually showed their leading role in the market, the domestic consumption structure was upgraded, and production and sales of high-end products such as thin-walled refrigerators and embedded refrigerators continued to grow. The company achieved 917/8.82 million square meters of vacuum insulation production and sales, with a year-on-year increase of 43%/35%, and the price of a single square meter was 93.2 yuan, a slight decrease of 2.1% year over year. The company is speeding up the implementation of the Liancheng and Feixi equipment investment and transformation plans. The additional production capacity will be gradually released in March '24. After the completion of the Anhui project, it is expected to add 5 million square meters of production capacity. We continue to be optimistic about the continuation of the company's main business growth. In addition, the company's key R&D project “Vacuum Glass Pilot Test Line” was installed within the year, and small-batch production was achieved, and product performance was gradually improved. The company is expected to rely on its own industry experience and customer resources in the field of home appliances to push vacuum glass into the supply chain of its own home appliance companies at a relatively rapid pace, and it is expected that application fields such as construction and transportation will gradually break through in the future.

Profitability has improved markedly, and the impact of raw material price increases may be limited

The company achieved an overall gross profit margin of 33.03% in '23, an increase of 6.43pct over the previous year. It is expected that the prices of raw materials and natural gas will drop mainly. At the same time, the company has further reduced labor and material costs through the development of process automation equipment for VIP production. Among them, the 24Q1 gross profit margin was 34.56%, up 2.9/4.76 pcts month-over-month and year-on-year, respectively. The fee rate for the 23-year period was 15.6%, up 1.2 pct year on year, mainly due to the 2.2 pct increase in financial expenses. Due to the decrease in earnings due to fluctuations in foreign exchange rates and the accrual of interest on convertible corporate bonds in 23, the net interest rate was finally achieved at 12.63%, an increase of 2.63 pct year on year, and 24Q1 continued to maintain a net interest rate of 12.83%. Although there is a recent trend of rising prices for raw materials such as upstream glass fiber, the company has the ability to produce and process ultra-fine glass wool, and the impact on the cost side is expected to be limited.

Be optimistic about the company's growth momentum and maintain the “buy” rating

The company has a clear first-mover advantage in the field of vacuum insulation panels, firmly expanding production (steadily advancing the Anhui vacuum industry manufacturing base project), or fully enjoying the industry growth dividends in the context of the increase in the penetration rate of VIP boards. Deeply cultivate the vacuum industry, promote the industrialization of vacuum glass, or become another growth engine for the company's growth.

Governance optimization, equity incentives further stimulate the innovation vitality and cohesion of the company's employees, and continue to be optimistic about the company's growth prospects. Considering that the release of vacuum glass's performance fell short of expectations, the 24-25 net profit forecast was lowered to 150/240 million yuan (previous value: 23/350 million yuan), and an additional 26-year net profit forecast of 330 million yuan was added. Referring to comparable companies, PE was given 30 times for 24 years, with a target price of 39.81 yuan, maintaining the “buy” rating.

Risk warning: Raw material costs have risen above expectations, customer development has fallen short of expectations, product development has fallen short of expectations, and the risk of exchange rate fluctuations.