occurrences

On August 29, 2024, the company released its 2024 semi-annual report. 2024H1 achieved operating income of 1.22 billion yuan, a year-on-year increase of 3.0%, and realized net profit to mother of 0.11 billion yuan, a year-on-year decrease of 11.5%, a gross profit margin of 24.5%, and an increase of 0.7 pct year-on-year.

Among them, the 2024Q2 company achieved operating income of 0.58 billion yuan, a year-on-year decrease of 1.5%, a year-on-month decrease of 9.6%, a net profit of 0.05 billion yuan, an increase of 27.3% year-on-year, a decrease of 8.1% month-on-month, and a gross profit margin of 27.0%, an increase of 5.0 pct year-on-year, and an increase of 4.8 pcts month-on-month. Business profitability increased month-on-month, and increased expenses affected performance.

Demand boosts target material business volume

2024H1's target materials and ultra-high temperature specialty materials business achieved operating income of 0.27 billion yuan, a year-on-year increase of 61.9%, and a gross profit margin of 27.9%. The downstream application of the company's target products is mainly aimed at the semiconductor and photovoltaic industry. The high-quality customer relationship in the semiconductor field is stable. The company has become a major supplier to many leading domestic panel companies and companies such as LGD in Korea, and is actively promoting domestic replacement of sputtering targets. Companies in the photovoltaic sector have achieved breakthroughs in research and development of novel low indium and indium free target technology. With the gradual release of HJT production capacity, perovskite and laminated technology have long-term growth potential, and demand boom continues to contribute incremental space, and the company is expected to fully benefit from large-scale deployment of the new technology.

Technological advantages of polymer materials to build moats

The company's energy-saving heat transfer business focuses on the field of large industrial heat transfer, with outstanding technical advantages in segmented industries. 2024H1's energy-saving heat exchange equipment business achieved revenue of 0.49 billion yuan, a year-on-year decrease of 14.8% and a gross profit margin of 24.1%. The company focused on technological innovation and continuous product upgrading, and its market share continued to increase. The polymer composites sector, PVC structural foam, PMI foam and other products are in a leading position in the country in terms of technology, and the extraction industry is being laid out. With the orderly advancement and release of 0.06 million tons of extractant production capacity under construction, it is expected that there will be a scale effect and good benefits.

Profit forecasting and investment advice

We expect the company's revenue for 2024-2026 to be 2.98/3.69/4.62 billion yuan, respectively, 20.9%/23.7%/25.2% year-on-year; net profit to mother will be 0.24/0.32/0.42 billion yuan, respectively, with year-on-year growth rates of 87.8%/35.9%/29.0%, respectively. EPS was 0.26/0.36/0.46 yuan respectively. The company's energy-saving heat exchange equipment is expected to benefit from the continuous advancement of the low carbon trend, and the technical advantages of material products are outstanding. With the domestic replacement of target materials and the HJT production capacity investment process, it is expected that successive volumes will support the company's performance and maintain a “buy” rating.

Risk warning: HJT production capacity release falls short of expectations, the display panel industry's boom fluctuates, and raw material prices fluctuate.