Description of the event

The company achieved revenue of 2.12 billion yuan (+16.0% year over year), realized vested net profit of 0.16 billion yuan (-27.4% year over year), and achieved attributable deducted non-net profit of 0.11 billion yuan (-9.1% year over year). 2024Q2 achieved revenue of 1.2 billion yuan (+23.8% YoY, +30.5% month-on-month), realized attributable net profit of 0.11 billion yuan (-27.1% YoY, +115.1% month-on-month), and realized attributable deducted non-net profit of 0.07 billion yuan (+16.9% YoY, +94.5% month-on-month).

Incident comments

The company's products are used in a wide range of fields. Based on new insulating materials, the company focuses on developing a series of products such as optical film materials, electronic materials, and environmentally friendly flame retardant materials. The products are widely used in power generation equipment, UHV transmission and transformation, smart grids, new energy vehicles, rail transit, consumer electronics, flat panel displays, electrical appliances, and 5G communications.

Since 24 years, the PV PET and ordinary resin film business has been under pressure, and high-end optical films and high-frequency high-speed resins have grown rapidly. Dongfang Insulation, a subsidiary of 24H1, achieved revenue of 0.8 billion yuan (+17.5%) and net profit of 0.04 billion yuan (-62.0%). New production capacity was gradually released, and both production and sales volume and revenue scale increased. However, the phased supply and demand conflicts in the photovoltaic industry chain were very prominent, and homogenization competition intensified, leading to a marked drop in prices for segmented products such as polysilicon and solar backplane base films. Short-term profitability was under pressure; Dongcai New Materials achieved revenue of 0.56 billion yuan (+3.9%) and net profit 0.1 billion yuan (+3.9%). billion yuan (+82.1% YoY), based on electrical insulation materials, actively expand new fields with strategic customers. Products such as bismaleimide resins, active ester hardener resins, and insulation materials for new energy drive motors have stable quality performance, obvious competitive advantage, smooth market expansion, and quickly occupy the incremental market; Jiangsu Dongcai achieved revenue of 1.27 billion yuan (+46.8%) and net profit of 0.03 billion yuan (-42.0% YoY). The company focused on improving emerging applications such as high-end displays, automotive decoration, and communication networks Market share in the field continues to increase in differentiated products such as release film base films for polarizers, MLCC release base films, and automotive functional films. However, during the equipment run-in period, the unit consumption of newly built production lines was high, fixed asset depreciation and energy labor costs increased, leading to a sharp year-on-year decrease in net profit; Shandong Shengtong achieved revenue of 0.22 billion yuan (+18.0%) and net profit of 1.64 million yuan (+113.7% YoY), and Shandong Emment achieved revenue of 0.37 billion yuan (+32.6%), net profit -0.05 billion yuan (-108.6% YoY), epoxy resin market Competition is intense, price differentiation is intensifying, and overall profitability is under pressure. In particular, the sales price of basic epoxy resins has been in a state of loss for a long time. The newly built production line is still in the stages of input testing, capacity climbing, and downstream certification. The scale effect has not yet been shown, and overall profitability is poor. In 24Q2, the company's gross profit margin was 16.1%, +3.4 pct month-on-month, net profit margin 8.8%, +4.0 pct month-on-month. Production and operation were stable, and profitability continued to improve. With the scale-up of the company's new production lines, the restructuring of low-end products, and the rapid growth of high-end products, the company is expected to maintain high growth.

New materials continue to advance, helping the company grow rapidly. The company cooperated with Korea's Chemax and Chongyi Chemical to develop the synthesis and purification business of high-end photoresist materials. Relying on Chemax's mature technical foundation and sales network, the company actively lays out the field of advanced photoresist materials. Currently, the relevant equipment has been installed and commissioned, and has entered the trial production stage. Based on the industrial chain integration advantages of the company's own PP base film, the composite copper foil fluid collection project was laid out and entered a vast new racetrack. With the rapid development of next-generation servers (AI servers, X86 servers), the company has independently developed electronic grade resin materials such as hydrocarbon resins, maleimide resins, active ester resins, benzoxazine resins, and special epoxy resins, and has established stable supply relationships with many world-renowned copper clad plate manufacturers. Some products have been supplied to mainstream server systems such as Nvidia, Huawei, Apple, and Intel. The company is actively expanding the market application of electronic materials in artificial intelligence, low-orbit satellite communications, etc., and plans to invest in the construction of an “electronic materials project with an annual output of 20,000 tons for high-speed communication substrates” through Sun Company Dongcai Electronic Materials (Meishan) Co., Ltd.

The company adheres to the R&D platform as the core, integrates new technology+new direction+scale, and grasps the direction of industry change to achieve rapid growth. The estimated net profit for 2024-2026 is 0.42/0.56/0.8 billion yuan, maintaining a “buy” rating.

Risk warning

1. The recovery in downstream demand fell short of expectations;

2. The progress of the new project is lower than expected.