Description of the event

In 2023, the company achieved revenue of 590 million yuan (+18.2% YoY), realized net profit of 80 million yuan (-1.4% YoY), and achieved attributable deducted non-net profit of 70 million yuan (+2.9% YoY). With 2024Q1, the company achieved revenue of 140 million yuan (+43.5% year over year), realized net profit of 12 million yuan (+298.3% year over year), and realized 10 million yuan of deducted non-net profit (+752.0% year over year).

In 2023, the company will pay a cash dividend of 2.20 yuan (tax included) for every 10 shares.

Incident comments

The company is a global manufacturer of new functional coating materials that targets the high-end consumer electronics and passenger car fields. Through an “interactive” independent research and “customized flexible manufacturing” model, the company provides customers with systematic solutions in multiple categories such as coatings, inks, adhesives, etc., focusing on the R&D, production and sales of new functional coating materials in the high-end consumer electronics field and passenger car field.

The company's operations continue to improve. In 2023, in the high-end consumer electronics sector, with the gradual recovery of demand in the downstream consumer electronics industry, the company actively grasped development opportunities and promoted a continuous increase in product shipments; the company actively carried out forward-looking layout, made full use of the advantages of the CMF innovation system to continuously innovate and upgrade products, process and technology, to further drive and explore market customer needs, successfully achieved mass production of a series of innovative coating solutions, and built industry benchmark projects such as Mate60, a major domestic consumer electronics customer, VisionPro, etc., in the high-end consumer electronics field It achieved annual revenue of 480 million yuan, an increase of 12.3% year on year. Among them, mobile phones and related accessories, laptop and related accessories, and wearable device segments achieved year-on-year growth of 20.0%, 5.2%, and 5.5%, respectively. In the passenger car sector, the company has grasped the development opportunities of the NEV industry and concentrated on the interior and exterior coating market. It has achieved a number of major historical breakthroughs in coating technology, market development and project implementation, and continued optimization of the product and customer structure. With the successive implementation and mass production of cooperative projects, the passenger car business achieved a total annual revenue of 100 million yuan, an increase of 47.2% over the previous year. The company achieved gross margin/net profit margin of 49.4%/13.3% in 2023, a year-on-year change of -0.7 pct/-3.2 pct. The company's R&D expenses ratio was 15.3%, and R&D investment continued to be high, and diversified. 2024Q1, the company started well. The high-end consumer electronics business achieved revenue of 110 million yuan, an increase of 49.4% year on year, and the passenger car business achieved revenue of 0.2 billion yuan, an increase of 28.4% year on year.

The company was the first to launch in the field of 3C coatings, with comprehensive coverage. It has achieved effective penetration into well-known domestic and foreign terminal brands such as Apple, HP, Google, Huawei, and Xiaomi, and has begun a global layout to strengthen market development. In the field of automotive coatings, the company aims to enter passenger car interior and exterior coatings. With the two core technical advantages of “PVD coating technology for passenger car parts” and “anti-fog resin and coating technology for passenger car lights,” the company has achieved a double breakthrough in technology and market. The core customers that have supplied or entered the customer system include North American T Company, Valeo, BYD, and NIO. The company has a forward-looking layout of insulation coatings for power batteries and became the world's first “insulating coating material+digital coating technology” systematic solution provider for the power battery industry. In order to meet environmental requirements, the company forwardly lays out water-based coatings to consolidate its leading edge in technology. In addition, the company has made breakthroughs in the fields of aircraft interior coatings, new integrated circuit inks, and the automotive original & aftermarket.

The company is a leading domestic high-end 3C paint company, actively exploring the automotive paint market. Benefiting from the rapid development of new energy vehicles, the company has broad business prospects. With leading technical advantages, the company is expected to complete the domestic replacement of automotive coatings after 3C coatings. Net profit attributable for 2024-2026 is estimated to be $1.2/17/270 million, respectively, maintaining a “buy” rating.

Risk warning

1. New technology and product development risk; 2. Downstream market demand fluctuation risk; 3. Increased risk of market competition; 4. Product verification falls short of expectations.