Report guide

The company released its 2024 mid-year report, achieving revenue of 2.013 billion yuan, a year-on-year decrease of 3.26%; net profit to mother of 0.137 billion yuan, a year-on-year decrease of 38.76%; net profit after deducting non-attributable net profit of 0.094 billion yuan, a year-on-year decrease of 55.25%. Among them, 24Q2 achieved revenue of 1.043 billion yuan, up 4.02% year on year and 7.62% month on month; net profit to mother was 0.057 billion yuan, down 44.41% year on year and 27.64% month on month; net profit without return to mother was 0.036 billion yuan, down 63.17% year on year and 39.40% month on month. The results were slightly lower than our previous expectations.

Key points of investment

Sales of major products increased rapidly, but the drop in product prices dragged down the company's performance 24H1. The sales volume of the company's main adhesive products was about 0.1274 million tons, an increase of 31.53% year on year. However, due to the drop in product prices, revenue fell 3.26% year on year, and net profit to mother fell 38.76% year on year. 24H1's renewable energy/big electronics/big transportation revenue was 0.936 billion yuan, 0.305 billion yuan, and 0.485 billion yuan respectively, with year-on-year changes of -19.3%, +1.2%, and +20.1%, respectively. 24H1's photovoltaic adhesive sales increased by more than 20% year on year, but the decline in product prices dragged down the sector's revenue and profit. 24H1 renewable energy gross profit margin was 11.99%, down 11 PCT year on year. 24H1's large electronics sector achieved revenue growth under product price pressure, mainly due to the rapid increase in consumer electronics customers. Product sales increased by more than 50% year on year during the same period, gross margin was 34.18%, down 5.42 PCT year on year, and remained at a high level. Domestic automobile production and sales picked up, and the penetration rate of new energy sources continued to increase. The company's major transportation segment grew across the board. The gross margin for the first half of the year was 22.79%, down 5.45 PCT from the previous year. The gross margin of the main products declined. The gross margin of 24H1 company fell 6.43 PCT to 19.08% year on year, and the net margin fell 3.93 PCT to 6.78% year on year. In 24Q2, the company's net profit to mother declined month-on-month. In addition to a 0.75 PCT reduction in product gross margin, three fees increased by 27 million yuan month-on-month, and impairment losses were about 10 million yuan. The net operating cash flow of 24H1 Company is -0.04 billion yuan, mainly due to an increase in cash from purchases of goods and acceptance of labor payments during the current period. 24H1's inventory turnover ratio was 3.39, up year on year; accounts receivable turnover ratio was 1.98, down year on year.

Photovoltaic glue is expected to bottom out, and the volume of electronic vehicles will help growth

The company is a leading photovoltaic rubber company. Product prices continue to be under pressure due to falling prices of upstream raw materials, and profitability has declined markedly. The gross margin of the 24H1 renewable energy sector is only 12%. According to various company announcements, Xinan Co., Ltd. and Elken both announced price increases for their silicone products in August. On August 16, the price of 107 glue increased by 200 yuan/ton from the previous low. With the steady recovery of raw materials, the profitability of the company's photovoltaic adhesives is expected to bottom out. The company's big electronics and transportation revenue increased in the first half of the year. As Guangzhou's 0.0393 million ton electronic adhesive project continues to grow and customers of new lithium battery products continue to grow, the growth trend is expected to continue in the second half of the year.

Profit forecasting and valuation

Prices of major products were under pressure, and the company's net profit to mother for 24-26 was reduced to 0.213/0.281/0.308 billion yuan. The current price corresponding PE was 19.74/14.98/13.67 times. We believe that the company's photovoltaic adhesives are expected to bottom out, and electronic adhesives, transportation equipment adhesives, etc. are expected to be released quickly to help the company grow in the future and maintain its purchase rating.

Risk warning

Product price fluctuations; customer development falls short of expectations; production capacity investment falls short of expectations, etc.