On August 7, Shangwei New Materials released its 2024 semi-annual report: in the first half of 2024, the company achieved revenue of 0.697 billion yuan, an increase of 7.19% year on year; realized net profit attributable to shareholders of listed companies was 44.5692 million yuan, an increase of 39.26% year on year; after deducting non-net profit, it was 41.3489 million yuan, an increase of 34.92% year on year.

Key points of investment

The increase in exchange earnings combined with a reduction in bad debt accruals. The company with a high net profit increase of 2024H1 achieved revenue of 0.697 billion yuan, an increase of 7.19% over the previous year; realized net profit attributable to shareholders of listed companies was 44.5692 million yuan, an increase of 39.26% over the previous year; the net profit after deducting non-net profit was 41.3489 million yuan, an increase of 34.92% year on year. Among them, 2024Q2 achieved revenue of 0.363 billion yuan, an increase of 8.9% over the previous month, and realized net profit of 26.1247 million yuan to mother, an increase of 41.64% over the previous month. Exchange rate fluctuations have increased the company's exchange earnings. At the same time, thanks to effective management of customer bad debt risks, the company's bad debt accruals have been reduced, and the company's net profit has increased significantly in 2024Q2.

Vinyl ester resins lead the market share, and the wind power industry is growing rapidly. Currently, the company's main business includes environmentally friendly, high-performance corrosion-resistant materials, materials for wind power blades, and new composites. In the domestic vinyl ester resin product market, the company's output and sales volume have been in a leading position for many years. It has a high market share and is a leader in the domestic industry.

2024H1, the company's environmentally friendly, high-performance corrosion-resistant materials, wind power blade materials, and new composites achieved 0.329 billion yuan, 0.279 billion yuan, and 884.696 million yuan respectively. Among them, wind power blade materials grew rapidly, with a year-on-year increase of 29%.

Circular economy materials and low-altitude economy open up space for development

The company closely follows the national development strategy, continues to enrich the product line and continuously expand downstream applications. Currently, the company has expanded in depth from the fields of energy saving and environmental protection and new energy to the fields of circular economy materials, low altitude economy, and energy storage. As a leading manufacturer in the global circular economy materials field, at the beginning of 2024, the company reached cooperation with Goldwind Technology and Sinoma for full-blade trial production; in March, the company signed a letter of intent to cooperate with Siemens Gamesa. The agreement stipulates that from 2026, all resins supplied by the company to Siemens Gamesa will be recyclable system series products.

In December 2023, China officially set the “low altitude economy” as a national strategic emerging industry. New navigation led by drones and eVTOL will become the main form of China's low-altitude economic development. As a new materials company with a rich heritage, the company's products have now been successfully applied to small aircraft through continuous investment in R&D.

Profit forecasting

We are optimistic that the company will continue to develop in new application fields. We predict that the company's revenue for 2024-2026 will be 1.57, 1.79, and 2.05 billion yuan, respectively, and EPS will be 0.2, 0.23, and 0.26 yuan respectively. The current stock price corresponding to PE is 26.4, 23.0, and 19.9 times, respectively, covered for the first time, giving an “increase in wealth” investment rating.

Risk warning

Systemic market risks; fluctuations in raw material prices; increased market competition; progress in new fields falls short of expectations, etc.