Incident: The company released its 2024 semi-annual report. During the reporting period, the company achieved revenue of 0.148 billion yuan, -13.51% year on year, realized net profit to mother of 0.022 billion yuan, +49.65% year on year, minus non-net profit -0.035 billion yuan, -32.66% year on year, gross profit margin of 31.69%, and +6.06 pct year on year.

Losses narrowed further, and the business structure continued to improve: 2024Q2 achieved revenue of 0.081 billion yuan, -15.15%/+20.21% month-on-month, net profit to mother of -0.008 billion yuan, -64.50% /month-on-month -45.43%, net non-net profit -0.013 billion yuan, -45.49% YoY/-37.17% month-on-month, gross profit margin of 33.84%, +8.80pct/month-on-month +4.75pct. Looking at 2024H1 by product: electromagnetic shielding film revenue was 0.088 billion yuan, +2.90% YoY, gross profit margin 51.66%, +0.3pct YoY. Copper foil revenue was 0.036 billion yuan, -58.29% YoY, gross profit margin 4.52%, +4.15pct YoY. The company's losses continued to narrow, shielding film revenue and profitability continued to grow, and copper foil product revenue declined but profitability improved, which also helped improve overall performance.

Various products have different optimistic developments: 1) Peelable copper for IC carrier boards continues to receive small-batch orders, and joint terminals are promoting applications in scenarios such as mobile phone chip packaging and motherboard RCC. 2) The second phase of the FCCL production line has been commissioned and installed, with a monthly production capacity of 0.325 million square meters. FCCL for homemade copper foil production continues to receive small-batch orders, and FCCL for homemade copper foil+homemade PI/TPI production has carried out downstream testing and certification in an orderly manner. 3) The resistor film for mobile phone acoustics is in the customer certification stage. Some customers have basically completed factory audits and received small-batch orders; thermistor films for chip thermal management closely cooperate with customers to carry out R&D and sample delivery testing. 4) In terms of copper foil for electromagnetic shielding of high-speed copper cables, the company closely interacts with terminals and domestic and foreign cable suppliers. The sample delivery tests meet the requirements, and the key indicators are superior to competing products. Further product optimization and business negotiations are currently being carried out.

5) According to the latest requirements of leading consumer electronics terminals, development and downstream testing and certification of cutting-edge products such as RCC/FRCC/ultra-thin dielectric layer FCCL are being carried out using self-peelable copper, ABF-like resin materials and synthetic technology.

Investment advice: The company's business trend is improving, various high-end materials are progressing smoothly, and future performance is expected to blossom more. We expect the company's 2024-2026 net profit to be 0.021/0.07/0.132 billion yuan, EPS 0.26/0.86/1.64 yuan, and the corresponding PE is 122.88/36.99/19.52 times, maintaining the “increase” rating.

Risk warning: risk of further decline in demand for shielding film; risk of industrialization of high-end materials such as peelable copper falling short of expectations; risk of rising raw material prices.