The company released its 2023 annual report: for the full year of 2023, it achieved revenue of 6.778 billion yuan, year-on-year net profit of -16.9%, net profit of 446 million, year-on-year, 4.1pct; 23Q4 achieved revenue of 1,842 billion yuan, +5.8% month-on-month, +6.5% month-on-month, net profit of 42 million yuan, year-on-year -52.8%, 4.6.7% month-on-month, gross profit margin of 12.6%, year-on-year +2.4pct, month-on-month. The company released its 2024 quarterly report: 24Q1 achieved revenue of 1,487 billion yuan, -5.6% YoY, -19.2% month-on-month, net profit to mother of 501 million, -65.0% YoY, +23.2% month-on-month, gross profit margin 16.3%, +0.1pct YoY, and +3.7pct month-on-month.

Performance review: Affected by the continued decline in EVA particle prices, the overall gross margin of 23q4 fell 7.0pct to 12.6% month-on-month, putting pressure on 23Q4 performance; 24Q1 EVA particle prices gradually stabilized, gross margin increased 3.7 pct month-on-month, and was gradually repaired, but due to parking and maintenance of some devices, product production declined, and the cost rate during the superposition period was relatively high as 15.8%, causing 24Q1 performance to decline year-on-year.

EVA photovoltaic film material leader, in-depth layout of POE materials and new energy battery materials.

Photovoltaic sector: Ethylene-vinyl acetate copolymer revenue in 2023 was 2.02 billion yuan, -28.6% YoY, gross profit margin 41.0%, YoY -10.1pct. The company's EVA products currently have a production capacity of over 150,000 tons/year, a production capacity under construction of 200,000 tons/year, and plans to start production in 25 years. In addition, the company's 90,000 tons/year VA unit was successfully put into operation once in January. Currently, it is operating at full capacity, enabling self-supply of raw materials for the EVA device and reducing production costs. At the same time, the company actively lays out the POE business and plans to build a 300,000 tons/year POE project, the first phase of which is 100,000 tons/year, which is expected to be completed and put into operation in '25.

Lithium battery field: The 20,000 tons/year UHMWPE device was put into trial operation at the end of March '24; the main raw materials EO and carbon dioxide required for the 100,000 tons/year lithium carbonate solvent project are all produced by the company and are in deep collaboration with the existing industrial chain; the 4,000 tons/year VC unit for the lithium battery additive project is scheduled to be completed and put into operation in 24. The industrial layout of various types of lithium battery materials has remarkable synergy advantages.

New projects in other fields are progressing steadily to support future performance growth. In the field of biomaterials, the first phase of the 100,000 tons/year lactic acid plant and the 40,000 tons/year PLA plant are scheduled to be completed and put into operation in the first half of '24, and the 50,000 tons/year PPC unit under construction is scheduled to be completed and put into operation in the first half of '24; in the field of special fine materials, the 10,000 tons/year electronic special gas project under construction is scheduled to be completed and put into operation in the first half of '24. Multi-field coverage and continuous optimization of the product structure further promote the company's development.

Profit forecast and investment rating: Considering particle price fluctuations, we are revising the company's performance. We expect to achieve net profit of 5.4/6.4/890 million yuan in 24-26 years (previous forecast value of 10.1/1.3 billion in 24-25), +21%/19%/38% year-on-year. The current stock price corresponds to PE 43/37/26 times, respectively, to maintain the “gain” rating.

Risk warning: Industry demand falls short of expectations; market competition intensifies; prices of upstream raw materials fluctuate; production capacity progress falls short of expectations, etc.