The recovery in downstream demand is compounded by strong demand for localization, and the OLED materials business is growing significantly

The company released its 2024 semi-annual report, achieving revenue of 0.342 billion yuan, +4.39% year-on-year, and net profit to mother of 0.092 billion yuan, or -5.81% year-on-year. Single Q2 achieved revenue of 0.084 billion yuan, -2.9% year-on-year, and net profit to mother of 0.003 billion yuan, or -219.75% year-on-year. Revenue side growth is mainly due to strong demand for consumer electronics and acceleration of domestic substitution, driving continued growth in the materials business. The 2024H1 materials business achieved revenue of 0.21 billion yuan, +48.9% year-on-year; the decline in net profit was mainly due to weakening demand for evaporation sources after construction of the sixth-generation AMOLED production line in China came to an end. Considering the weakening demand for evaporation sources, we lowered our profit forecast for 2024-2026. We expect net profit for 2024-2026 to be 1.8 (-0.2) /2.8 (-0.3) /3.8 (-0.6) billion yuan, respectively, and the corresponding EPS is 1.2 (-0.1) /1.9 (-0.2) /2.5 (-0.4) yuan, respectively. The current stock price corresponding to 2024-2026 PE is 26.3/17.0/12.7 times, respectively. We are optimistic about domestic substitution in the materials business and the gradual expansion of the equipment business, and maintain “purchases” ” Ratings.

Firmly grasp the increasing opportunities of localization in the materials market, and continue to launch new high-value products

In terms of light-emitting materials, the company's RGB Prime materials have all been introduced into production lines to achieve stable supply; research and development of red and green main materials and mixed materials is progressing smoothly, and verification with customers has begun. In terms of electronic and hole functional materials, the overall performance of high-mobility electron transmission and hole blocking materials has reached or is superior to competing products and is being verified by customers. In terms of packaging and PSPI materials, self-developed packaging and PSPI materials have been supplied to production lines.

Among them, PSPI Materials 2024H1 achieved revenue of 11 million yuan and is expected to continue to expand. In addition, domestic substitution of materials such as PFAS-FreePSPI in thinning formulations and the development of low dielectric constant technology is also being promoted at an accelerated pace.

Looking forward to the future, as demand for consumer electronics continues to be strong and the localization process of OLED materials is further accelerated, the company is expected to continue to expand its materials business with the advantages of customer coverage and mass-produced materials.

The forward-looking layout of high-generation evaporation source technology is expected to further benefit from new growth space in the equipment market

The company has now completed the preparation of an 8.6-generation linear evaporation source prototype, which is currently being tested and promoted; the design and processing of the perovskite evaporator has also been completed and is currently being assembled; and the silicon-based OLED evaporator has also achieved phased results. Looking forward to the future, the peak of 8.6-generation line construction is imminent, and there are still needs for renovation and maintenance of existing production lines. As a leading domestic linear evaporation source enterprise, the company is expected to rely on first-mover advantages and technical reserves to firmly grasp the development trend of resonance between the stock market and the incremental market, thereby driving the equipment business back on a growth path.

Risk warning: New product development or introduction falls short of expectations, and OLED panel shipments fluctuate.