Incident: The company released its 2024 semi-annual report. During the reporting period, it achieved operating income of 1.956 billion yuan, a year-on-year decrease of 5.66%, net profit of 0.215 billion yuan, a year-on-year decrease of 44.71%, after deducting non-net profit of 0.196 billion yuan, a year-on-year decrease of 48.72%; of these, the second quarter of 2024 achieved operating income of 1.018 billion yuan, a year-on-year increase of 8.59%, and net profit to mother of 0.117 billion yuan, a year-on-year decrease of 0.117 billion yuan. 45.04%, up 18.95% month-on-month.
Revenue from the functional materials segment is growing steadily, and the OLED materials business is growing rapidly. In the first half of 2024, the company's functional materials achieved revenue of 1.62 billion yuan, a year-on-year increase of 5.35%, gross profit margin of 40.67%, and a year-on-year decrease of 2.2 pct. The company continues to maintain its position as the world's leading supplier of high-end liquid crystal monomer materials, which declined year-on-year in the first half of the year due to demand; the zeolite series environmentally friendly materials business declined due to customer inventory removal, but zeolite molecular sieves used in the field of petrochemical catalytic cracking have already been sold. The company's OLED materials business is developing well. The holding subsidiary Jiumu Chemical achieved revenue and net profit of 0.49 billion yuan and 0.134 billion yuan respectively, with year-on-year increases of 34.8% and 57.6% respectively, continuing to maintain its leading position in the materials industry before OLED sublimation; March Technology's revenue for the first half of 2024 was about 72.87 million yuan, an increase of about 92.3% year on year, and the downstream application of OLED finished materials and PI finished materials for display continued to advance.
Revenue from life science and pharmaceutical products has declined significantly, and new products are being actively deployed and developed. In the first half of 2024, the company's life science and pharmaceutical product revenue was 0.311 billion yuan, down 38.53% year on year, gross profit margin was 37.20%, up 1.48 pct year on year. Among them, MP realized revenue and net profit of 0.237 billion yuan and -19.75 million yuan, respectively, down 17.1% and 292.3% year on year. In terms of the pharmaceutical product business, demand for customer-specific pharmaceutical intermediate products shrank due to phased demand in the same period last year, which had a corresponding impact on the company's pharmaceutical products business. In terms of life science and in vitro diagnosis business, downstream demand in MP's industry has declined, and competition in the industry is intensifying, which has an impact on its business. In the future, MP will continue to improve quality and efficiency, actively lay out and develop new products, and promote the continuous development of the company's life science and pharmaceutical industry.
Increase R&D investment to develop new material products, and the layout of new projects is progressing smoothly. In the first half of 2024, the company invested 0.199 billion yuan in R&D, an increase of 39.9% over the previous year. Based on market research and downstream customer needs, the company increased research projects, and related expenses were invested in R&D of materials such as OLED materials, semiconductor manufacturing materials, and polyimide materials. During the reporting period, the company's semiconductor manufacturing materials business showed a good growth trend. The “Photoresist Resin Series Product Project with an annual output of 65 tons” was put into use in 2023, and produced and supplied according to customized customer needs. The “China Energy Saving Wanrun (Penglai) New Materials Phase I Construction Project” launched by the company in 2022 is being actively promoted, and plans to expand production capacity for electronic information materials and new energy materials. Furthermore, in the field of new energy materials, the company has already supplied materials for perovskite solar cells, developed photovoltaic film materials in 2023, and passed downstream certification and sales during the reporting period.
Give an “increase in wealth” investment rating. Since demand in the downstream market for some products fell short of expectations, we adjusted our profit forecast. The company's net profit for 2024-2026 is 0.516 billion, 0.631 billion, and 0.756 billion yuan, respectively, and EPS is 0.55, 0.68, and 0.81 yuan respectively. The current stock price corresponds to PE of 14, 12, and 10 times, respectively, giving an “increase in equity” investment rating.
Risk warning: Downstream demand falls short of expectations, raw material prices fluctuate, and the commissioning of new projects falls short of expectations.