Incidents:
The company announced the expiration of the stock increase plan period and the completion of the increase in holdings. As of the disclosure date of the announcement, a total of 23 people, the controlling shareholders, actual controllers, directors, supervisors and core middle management personnel of the company had increased their holdings by a total of 6.3159 million shares, accounting for 1.40% of the company's total share capital, totaling 60.2507 million yuan (excluding transaction fees). The implementation period of the increase plan has expired and the implementation has been completed.
Comment:
Q1 Revenue increased significantly, and cash flow improved substantially. The company focuses on functional coating composites business. Its products are mainly used in the fields of optics, new energy vehicles, microelectronics, etc., to provide functions such as bonding, protection, anti-interference, thermal conductivity and heat dissipation, and conductive insulation between downstream products such as smartphones, tablets, laptops, wearable devices, automotive electronics, etc., and is a national-level specialized and innovative “little giant” enterprise. Sales of optical, new energy and other functional adhesive products, which 24Q1 focuses on, grew rapidly, achieving revenue of 0.664 billion yuan, +37.40% year over year; gross margin declined slightly to 21.04%, or -3.93 pct year on year due to cost increases. On the cost side, the total cost rate for the four 24Q1 items was 20.39%, or -0.14pct year on year, of which the financial expense ratio was 3.66%, +1.16pct year over year, mainly due to the transformation of major construction projects in the previous year, and part of the loan expenses were due to the shift from capitalization to fee conversion. The profit side was under pressure due to factors such as consolidation and depreciation. 24Q1 achieved net interest rate of 2.81% to mother, -1.37pct year on year, and net profit to mother 0.019 billion yuan, or -7.74% year-on-year. In terms of cash flow, the 24Q1 company's operating cash flow improved dramatically, achieving a net cash flow of 0.033 billion yuan from operating activities, which changed from negative to positive +141.54% over the previous year.
Lay out an integrated industrial chain, and put into production volume for multiple projects. The company focuses on developing materials related to optics, microelectronic components and new energy batteries, as well as high-end PET substrates, continuously improving the self-production ratio of optical substrates and adhesives, and building an integrated industrial chain of “glue/base film - release film - finished film - laminating film group - CNAS self-inspection”. Major construction projects such as the OCA optical adhesive project, MLCC release film project, and optical PET project have been completed and put into operation in the past two years, and it is expected that the company's profits will gradually increase in the future.
OCA products have broken the monopoly of international giants, and there are broad prospects for the localized alternative market. OCA optical adhesive is a key bonding material for touch screens and optical films. The related market has been controlled by overseas giants such as 3M, Mitsubishi Chemical, and Nitto Electric for a long time. According to data from the Vehicle Display Technology Exhibition, the size of the OCA adhesive market reached 28 billion yuan in 2023. The company's self-developed OCA optical adhesive products have broken the monopoly of international giants and continued to achieve breakthroughs in some terminals. With the gradual implementation of localization and the continuous expansion of OCA production lines, it is expected to drive a further increase in the overall gross profit level in the future.
Profit forecast and investment rating: We believe that the company has a leading position in the functional coating composites industry. The increase in management holdings shows confidence in long-term development, and optical and new energy products are expected to gradually expand.
The company is expected to achieve operating income of 2.718/3.513/4.208 billion yuan and net profit to mother of 0.157/0.268/0.372 billion yuan in 2024-2026, corresponding PE of 30.08/17.60/12.70 times. It is covered for the first time and gives a “buy” rating.
Risk warning: raw material prices fluctuate; demand falls short of expectations; industry competition intensifies