The company released its 2024 semi-annual report, with a year-on-year decrease of 57% in the first half of the year. Among them, Q2 performance increased 74% month-on-month; the company's EVA particles are expected to further reduce costs, which may open up room for revenue and profit growth after the POE particle device is put into production in 2025. Maintain an increase in holdings rating.

Key points to support ratings

The company's performance in the first half of 2024 fell 56.82% year on year: the company released its 2024 semi-annual report, and achieved revenue of 3.313 billion yuan in the first half of the year, up 3.31% year on year; achieved profit of 0.141 billion yuan, a decrease of 56.82% year on year; realized deduction of 0.112 billion yuan for non-profit, an increase of 60.73% year on year. Based on performance calculations, 2024Q2 achieved a profit of 0.089 billion yuan, a year-on-year decrease of 50.06% and a month-on-month increase of 73.65%.

The main business is under pressure in the short term, and VA self-supply is expected to drive cost reduction: due to factors such as price changes in the downstream photovoltaic market, the price of EVA particles is on a downward trend. According to SMM data, the average price of 2024H1 PV EVA particles was about 0.0116 million yuan/ton, down about 29% year on year, driving the company's sales revenue decline.

In the first half of 2024, the company achieved sales revenue of EVA particles of 0.796 billion yuan, a year-on-year decrease of 22.93%, and achieved a gross sales margin of 36.25%, a year-on-year decrease of 6.68 percentage points. In addition, the company's VA self-supply level has gradually increased. The company's current EVA particle production capacity is 0.15 million tons/year. In January 2024, the company will start production with 0.09 million tons/year VA production capacity to achieve self-supply of raw materials for existing EVA devices, which is expected to reduce production costs and increase profit levels.

The centralized commissioning of projects under construction is expected to bring new growth space: several of the company's projects are expected to be put into operation in 2024-2025. The specific projects include: 1) 0.09 million tons/year VA unit put into operation in January 2024; 2) 0.02 million tons/year UHMWPE plant will be put into operation in March 2024. The product is being tested by customers, and sales will gradually increase; 3) In May 2024, 0.01 million tons/year electronic-grade high-purity special gas devices will be successfully put into operation Driving; in addition, the company's PLA device has entered trial production; the 4000 tons/year lithium battery additive VC device has entered the installation stage. The company plans to put into operation 0.1 million tons/year PoE device in 2025. Currently, the project has passed safety assessment, EIA, and energy assessment approval; 0.2 million tons/year EVA is planned to be put into operation. We believe that the commissioning of the company's new projects will support the company's medium- to long-term profit growth.

valuations

Based on the company's current production capacity structure and post-production capacity planning, PV EVA particle supply and PV module demand, we adjusted the company's 2024-2026 earnings forecast to 0.29/0.37/0.57 yuan (the original 2023-2025 forecast was 0.51/0.57/0.65 yuan), corresponding to a price-earnings ratio of 44.7/35.5/22.8 times; considering that the company has a certain cost advantage in the EVA particle sector, we maintain an increase rating.

The main risks faced by ratings

The industry's production capacity release exceeded expectations; product price competition exceeded expectations; downstream demand fell short of expectations; raw material and fuel power prices fluctuated; and photovoltaic policy risks.