Incident: The company released its 2024 semi-annual report. 2024H1 achieved operating income of 10.764 billion yuan, up 1.39% year on year, and achieved net profit of 0.928 billion yuan, up 4.95% year on year; 2024Q2 achieved operating income of 5.442 billion yuan, down 4.57% year on year, and realized net profit of 0.407 billion yuan year on year, down 21.79% year on year.

Adhesive film shipments remain high, but backboard shipments are under pressure. As a prudent measure, prepare 0.235 billion yuan for impairment.

(1) 2024H1 shipped 1.389 billion square meters of photovoltaic film, up 43.61% year on year; the average sales unit price (excluding tax) was 7.11 yuan/square meter, a year-on-year decrease of 27.73%; achieved operating income of 9.879 billion yuan, up 3.79% year on year; gross margin increased 3.38 pct year over year to 16.76%. (2) 2024H1 shipped 67.7815 million square meters of backplane, a year-on-year decrease of 18.26%; the average sales unit price (excluding tax) was 6.12 yuan/square meter, a year-on-year decrease of 30.91% (the decrease in shipment volume was mainly due to a decrease in demand for single-glass modules); achieved operating income of 0.415 billion yuan, a decrease of 43.53% year over year; gross margin decreased by 8.35 pcts to 4.29% year on year.

With the elimination of the impact of high-priced raw material inventories in the early stages and the continuous optimization of the product shipment structure, the profit situation of the company's 2024Q2 photovoltaic film products improved markedly, driving the company's 2024Q2 gross margin to an increase of 2.77 pcts month-on-month to 18.05%. As a prudent measure, the 2024H1 company accrues impairment reserves of 0.235 billion yuan, which will reduce the company's semi-annual net profit by 0.208 billion yuan.

Shipments of photosensitive dry film and aluminum-plastic film have maintained a high increase, and RO support films have been sold in batches.

(1) 2024H1 shipped 73.6651 million square meters of photosensitive dry film, up 35.83% year on year; the average sales unit price (excluding tax) was 3.74 yuan/square meter, a year-on-year decrease of 6.55%; achieved operating income of 0.275 billion yuan, up 26.92% year on year; gross margin increased 1.96 pcts year over year to 24.08%.

(2) 2024H1 shipped 5.606 million square meters of aluminum-plastic film, up 35.54% year on year; the average sales unit price (excluding tax) was 10.51 yuan/square meter, a decrease of 6.66% year on year; achieved operating income of 58.9002 million yuan, an increase of 26.52% year on year. The company's aluminum-plastic film products were successfully introduced to some power customers such as Ganfeng Electronics and Nandu Power, and it is expected that the industry ranking will be further enhanced in the future. In addition, the company's RO support film has been recognized by downstream customers and has formed batch sales, and is expected to become a new performance growth point in the future.

Maintaining a “buy” rating: We maintain our profit forecast. We expect the company to achieve net profit of 2.563/3.066/3.577 billion yuan in 24-26, and the current stock price is 14 times PE in 2024. As the absolute leader in the adhesive film industry, the company's advantages in terms of capital, scale, and technology are expected to further increase the company's market share. At the same time, the expansion of production capacity and diversified product development in the backplane and electronic materials business are expected to bring new performance growth points to the company and maintain a “buy” rating.

Risk warning: PV installations fall short of expectations; risk of declining market share due to increased competition; development of new electronic materials business falls short of expectations; risk of fluctuating raw material prices, etc.