Key points of investment:

Revenue and net profit to mother increased significantly in '23, and the 24Q1 results continued to perform well. The company released its 23 annual report and 24Q1 financial report. It achieved revenue of 0.84 billion yuan for the full year of '23, an increase of 31.7% year on year, and realized net profit of 0.106 billion yuan to mother, an increase of 66.14% year on year. After deducting non-net profit, it reached 0.107 billion yuan, an increase of 85.9% year on year. On a quarterly basis, 23Q4 and 24Q1 achieved revenue of 2.48 billion yuan and 0.223 billion yuan respectively, with year-on-year increases of 39.3% and 46.4%, and net profit to mother of 0.27 and 0.029 billion yuan respectively, up 15.4% and 152.1% year-on-year. Revenue remained high in the single quarter, and profit performance was even better. In 2023, the company plans to pay a dividend of 0.4 yuan/share to all shareholders, using capital reserve to increase 4.5 shares for every 10 shares, corresponding to the stock price dividend rate of 2.8% on August 7.

Revenue benefits VIP demand is good, and profitability has recovered. By business, in 2023, the company achieved revenue of 0.822 billion yuan, a year-on-year increase of 32%. Domestic sales by region achieved revenue of 0.376 billion yuan, a year-on-year increase of 48%, and foreign sales achieved revenue of 0.461 billion yuan, an increase of 22% over the previous year.

In terms of sales, the company achieved sales volume of 8.816 million square meters in 2023, an increase of 35% over the previous year.

In 2023, benefiting from the market guidance of energy efficiency standards for refrigerators in developed countries and regions and the upgrading of domestic consumption structures, global demand for vacuum insulation panels was strong, and the company achieved good performance as an industry leader. In terms of profitability, the gross margin of the company's vacuum insulation board business increased by 6.09 pct year on year to 33.3% in 2023. By region, domestic and foreign gross margins increased by 5.58 pct/7.16 pct, respectively, to 26.9% and 38.3%.

The company's profitability has benefited from the reduction in raw material costs and liquefied natural gas costs, and overall business revenue and profitability have recovered well.

Promote the construction of vacuum glass production lines and improve the layout of our vacuum business. In 2023, the company's subsidiary Weiaiji vacuum glass production base started construction in the first half of the year. During the reporting period, the company's “vacuum glass pilot test line” was installed to achieve program introduction, full line linkage and multi-specification small-batch production. The company's vacuum glass can be used for door parts of electrical products such as freezers, wine cabinets, display cases, etc. In specific applications, it has certain complementarity with vacuum insulation panels and the characteristics of coincidence with downstream customers, and the synergy effect is remarkable. In 2024, the company will continue to promote the construction of industrial production lines for vacuum glass to enrich the company's existing product matrix.

Profit forecasting and investment advice. In the short term, the company got rid of the negative impact of raw materials in the early stages, and achieved a significant recovery in revenue and profitability. Looking at the medium to long term, we judge that the trend of increasing the penetration rate of VIP vacuum insulation panels continues. At the same time, the company's vacuum glass layout is expected to further expand its business layout and strengthen overall collaboration.

We expect the company's 24-26 EPS to be 1.00/1.26/1.54 yuan/share, a year-on-year increase of 59%/26%/22%, giving the company a 24-year 23-25 xPE valuation, corresponding to a reasonable value range of 23.00-25.00 yuan, a “superior to the market” rating.

Risk warning: Downstream demand falls short of expectations, and vacuum glass business is falling short of expectations.