Report guide

The company released its 2024 mid-year report, achieving revenue of 2.122 billion yuan, a year-on-year increase of 16.03%; net profit to mother of 0.16 billion yuan, a year-on-year decrease of 27.45%; net profit after deducting non-return to mother of 0.109 billion yuan, a year-on-year decrease of 9.08%. Among them, 24Q2's single quarter revenue was 1.202 billion yuan, up 23.79% year on year and 30.51% month on month; net profit to mother was 0.109 billion yuan, down 27.08% year on year, up 115.11% month on month; net profit without return to mother was 0.072 billion yuan, up 16.94% year on year and 94.50% month on month. The performance exceeded our previous expectations.

Key points of investment

Sales of major products increased month-on-month. The Q2 performance reversed the 24H1 Company's electrical insulation/new energy/optical film/electronic materials/environmentally friendly flame retardant sales increased 27.5%/32.8%/5.0%/43.4%/66.5% year-on-year, respectively, and the average price changed -15.9%/-18.0%/+3.6%/-6.7%/-9.6% year-on-year, respectively. Prices of major products have been under pressure since the first half of the year, but benefiting from the high-quality development of emerging industries such as computing power upgrades, artificial intelligence, and new energy vehicles, the company's sales volume of electronic materials such as electrical insulation and Shuangma Resin increased dramatically. The net interest rate of the subsidiary Dongcai New Materials increased 8.0 pct year on year, and achieved profit of 0.104 billion yuan in the first half of the year, an increase of 82.05% over the previous year. Furthermore, since the beginning of the year, consumer electronics have gradually recovered. The average price and sales volume of the company's optical film have both increased positively year on year, and the price of polyester chips, the superimposed raw material, has declined year on year, and profitability is expected to gradually improve. Looking at the single quarter, the 24Q2 company's sales of electrical insulation/optical film/electronic materials increased month-on-month. Combined with the company actively adjusted the product structure, Q2 profitability increased markedly month-on-month, with gross sales margin of 16.12%, up 3.41 pcts month-on-month; net sales margin was 8.80%, up 3.99 pcts month-on-month. 24H1's net operating cash flow was 0.227 billion yuan, a year-on-year decrease of about 59 million yuan, mainly due to an increase in labor wages and taxes paid. The 24H1 company's inventory turnover ratio was 3.62 and the accounts receivable turnover ratio was 2.54, both of which increased year-on-year.

The addition of 0.02 million tons of high-speed electronic materials accelerated the company's performance growth by 1.925 billion yuan. In the first half of the year, the “0.025 million ton optical film for polarizer”, “0.02 million ton ultra-thin MLCC optical film technology improvement project”, and “3000 ton ultra-thin polypropylene film - line 1” all entered trial production, which is expected to drive further growth in the company's performance. Currently, the company's products such as maleimide resin and active ester resin have been supplied to mainstream server systems such as Nvidia, Huawei, Apple, and Intel through domestic and foreign first-line copper-clad plate manufacturers. Driven by strong demand for AI servers, etc., the company announced on August 21, '24 that it plans to invest 0.7 billion yuan to build a 0.02 million ton electronic materials project for high-speed communication substrates. The project is expected to achieve revenue of 2 billion yuan, net profit of 0.6 billion yuan, and the net interest rate of the project is as high as 30%. In addition, Chengdu Dongkaixin, a single subsidiary of photoresist, has also entered the trial production stage. Many products are worth looking forward to, and I am optimistic about the company's future growth.

Profit forecasting and valuation

In the first half of the year, Ammont Epoxy's profit was under pressure, reducing the company's 24-26 net profit to 0.388/0.574/0.793 billion yuan, corresponding to PE 14.8/10.0/7.2 times, respectively. The company is a platform-based new materials company. Many products such as high-end optical substrates, high-speed resins, photoresists, and composite copper foils are worth looking forward to, and maintain the purchase rating.

Risk warning

Production time falls short of expectations; fluctuations in raw material prices; brain loss; exchange rate fluctuations, etc.;