Incident: The company released its 2024 quarterly report. In 24Q1, the company achieved revenue of 55 million yuan, +22.36%, and -18.83% month-on-month; realized net profit of -0.17 million yuan, increasing year-on-year losses and increasing month-on-month losses; deducted non-net profit of -0.16 million yuan, increasing year-on-year losses and increasing month-on-month losses.
Performance is under pressure in the short term due to increased competition and expenses, and profitability is expected to recover in 24 years: 24Q1 company's gross margin was 22.14%, -6.96pct year-on-year, -1.14pct month-on-month; net interest rate was -30.30%, -13.29pct yoy, and -12.60pct month-on-month. Continued pressure on the profit side is mainly due to: 1) Since 2023, Korea's PIAM has drastically reduced the price of thermal control PI films, increasing competitive pressure and declining gross margin. 2) The refurbishment of the Jiaxing project plant increased depreciation of management expenses and increased interest expenses for financial expenses. Q1 The company's sales/management/R&D/finance expense ratios were 2.65%/19.57%/14.73%/14.64%, respectively, with year-on-year changes of -0.70/+0.95/-2.48/+6.55pcts, respectively. Looking ahead to 24 years, the company's profitability is expected to be restored as the company continues to adjust its product structure and mobilize more production resources in favor of electronic PI films. At the same time, the company is also actively developing second-generation ultra-thick graphite with high thermal conductivity, upgrading thermal control PI film products, and improving the profitability of corresponding products.
Continued to increase investment in R&D, and progress of various new products accelerated: in 2023, the company continued to maintain R&D investment, promote the development of polyimide products in the fields of flexible displays, new energy, integrated circuit packaging, and aerospace applications, accelerate the launch of new 5/6G low dielectric substrates and flexible electronic substrate products, promote upgraded products for high thermal conductivity PI films, increase the development of a series of products for optoelectronic applications, and accelerate the application market evaluation of PI films for integrated circuit packaging COFPI applications and high thermal conductivity PI films for semiconductor applications. OLED substrates use new functional products such as PI and CPI paste, and high-insulation 1500mm wide PI films for space applications have completed joint inspection by application units.
New production capacity will soon be released in Jiaxing in '24, and it is expected to blossom more in the future: According to the annual report, the construction of the 1,600-ton fund-raising project plant in Jiaxing has been basically completed, the installation of 4 main production lines and supporting factory systems has been completed, and equipment debugging has been carried out. In 23Q3, commissioning of feed products began to be carried out to verify the process stability of the production line and the operation of various auxiliary systems. Two of the production lines were put into use in September 2023, and the other 2 production lines continued to carry out product process debugging. The equipment installation work for the remaining 2 chemical production lines has been completed, and system debugging conditions are in place, and commissioning will begin in December 2023. After the Jiaxing project is put into operation one after another, the additional production capacity will help enhance the company's overall product layout capabilities and greatly enhance the company's ability to guarantee the supply of products in the electronics field. Multiple production lines provide more R&D and launch resources for multiple application fields and multiple product solutions, while multiple production lines guarantee production efficiency for the production of multiple categories of products. In the future, in line with changes in market demand, the company will accelerate the expansion of the electronics market and the new energy market while maintaining a relatively stable existing product structure, focusing on promoting new products such as TPI, PI for COF, and PI with high thermal conductivity, and improving the quality of operations.
Lower profit forecasts and maintain a “buy” rating: As heat control products face a price war, increased competition has put pressure on the company's performance. At the same time, the company's plant was fixed and depreciated, and expenses increased during the period. The fund-raising project had not yet been fully put into operation, causing a certain drag, so we lowered the company's profit expectations. As the company's new product development continues to advance and Jiaxing successfully releases 1,600 tons of additional production capacity, the company's profitability is expected to recover.
The company's net profit for 2024-2026 is expected to be RMB 10 billion, RMB 30 million, RMB 65 million, EPS is RMB 0.05, RMB 0.17, RMB 0.36, and PE is 229X, 74X, and 34X respectively.
Risk warning: Market demand falls short of expectations, market competition risks, capacity release falls short of expectations, new product verification falls short of expectations.