The company's business situation in the first half of 2024: According to the company's semi-annual report, 2024H1 achieved operating income of 10.764 billion yuan, an increase of 1.39% over the previous year; net profit to mother of 0.928 billion yuan, an increase of 4.95% over the previous year.

Among them, 2024Q2 achieved revenue of 5.442 billion yuan, a year-on-year decrease of 4.57%, and a month-on-month increase of 2.27%; realized net profit to mother of 0.407 billion yuan, a year-on-year decrease of 21.79%, a year-on-year decrease of 21.97%.

Shipments of photovoltaic film and photosensitive dry film are growing rapidly. According to the company's semi-annual report, 2024H1 shipped 1389.064 million square meters of photovoltaic film, up 43.61% year on year; shipped 67.7815 million square meters of photovoltaic backplane, down 18.26% year on year; shipped 73.6651 million square meters of photosensitive dry film, up 35.83% year on year; and shipped 5.606 million square meters of aluminum-plastic film, up 35.54% year on year.

The profit of the main business is stable, and the company's gross margin has increased. According to the company's semi-annual report, with the overall growth rate of the photovoltaic market slowing down and production capacity gradually being cleared, the company relied on strong technology research and development capabilities and cost control capabilities to achieve stable profits, while global market share and product gross margin both increased. The improvement in gross margin of main products such as adhesive film and backboards led the company's overall Q2 gross margin to increase 1.43 percentage points year over year and 2.77 percentage points month over month.

Significant competitive advantages help stabilize the industry cycle. 1) Equipment self-production advantages: According to the company's semi-annual report, the company is one of the few enterprises in the industry with the ability to independently develop complete equipment. The independent assembly line makes the company's investment cost lower than that of the entire outsourced line, and effectively prevents the spread of core technology and processes; 2) Customer resource advantage: The company has basically achieved full coverage of major domestic and foreign PV module companies and established strong customer resource barriers; 3) Global layout advantage: The company took the lead in overseas production capacity layout. The Thai production base was put into use in 2018, and construction of the Vietnam base began in 2022. In 2024, the second phase of production expansion at the Thai base will be launched to ensure stable shipments and production capacity expansion in the context of cyclical fluctuations in the industry.

The electronic materials business developed steadily, and aluminum-plastic film began to be released. According to the company's semi-annual report, after an 8-year industrial development cycle, the company in the field of electronic materials has now formed a self-supply of core raw materials for products, achieving a dual base layout in East China and South China and the construction of domestic and overseas segmentation bases. Customers cover leading downstream manufacturers such as Pengding Holdings, Shanghai Electric Power Co., Ltd., Shennan Circuit, and Jingwang Electronics. In the field of functional film materials, the company's aluminum-plastic film products have gone through early capacity investment and customer verification, and have now begun to enter the sales volume stage. We believe that the electronic materials business is expected to become a new growth point for the company next year.

Profit forecast and rating: We expect the company's net profit to be 2.288, 2.785, and 3.393 billion yuan respectively in 24-26, up 23.7%, 21.7%, and 21.8% year-on-year. As a leader in photovoltaic film, the company's profitability remains industry-leading. Refer to comparable companies that gave the company a 22-24 times PE valuation in 2024, corresponding to a reasonable value range of 19.36-21.12 yuan, giving it a “superior to the market” rating.

Risk warning: Risk of new PV installations falling short of expectations; risk of industry and market competition.