Key points of investment

Q2 Profit increased significantly from month to month, slightly exceeding expectations. The company's 24H1 revenue was 11.5 billion yuan, same +24.6%, net profit to mother of 0.18 billion yuan, same as -47.6%, gross profit margin 9.9%, same -3 pct, net interest rate 1.6% to mother, same -2pct; of these, 24Q2 revenue was 6.4 billion yuan, +35.1%/24.3% year on month, net profit 0.15 billion yuan, year-on-month net profit of 0.15 billion yuan, year-on-month net profit of -22%/+403%, gross profit margin of 10% month-on-month, -3/+0.3pct %, YoY -2/+2pct.

Q2 The bottom profit of lithium foil stabilized at 2,000 yuan/ton. The company shipped 0.059 million tons of 1H lithium foil, a slight increase of 5% over the previous year. Among them, Q2 shipments were 0.033 million tons, +6%/+27% year over month. September orders increased markedly. The annual shipment volume is expected to be 0.14-0.15 million tons, an increase of 10-15% year on year. In terms of profit, Q2's separate profit remained at 2,000 yuan, flat month-on-month, contributing 0.06-0.07 billion yuan in profit. Due to basic losses from second-tier manufacturers, aluminum foil processing fees have bottomed out, and the company's profit level is expected to remain stable.

Traditional foil Q2 profits improved, contributing to performance elasticity. Q2 packaging foil shipments were 0.08 million tons, up 30% month-on-month, reversing losses per ton and rising to around 0.0008 million yuan, contributing 0.06 billion yuan+ profit, mainly benefiting from scale effects and improved profits of overseas subsidiaries. The annual shipment volume is expected to be around 0.3 million tons, contributing about 0.2 billion yuan in profit. Q2 The shipment volume of air conditioning foil and strip was about 0.13 million tons, an increase of about 10% over the previous month. The profit per ton contributed 0.0001-0.002 million yuan, and the annual shipment volume is expected to be 0.35 million tons+.

Q2 Cash flow improved substantially. The company's expenses for the 24H1 period were 0.76 billion yuan, the same 7%, the cost rate was 6.6%, the same -1 pct, of which the Q2 period cost was 0.39 billion yuan, 10%/4.5%, the cost ratio was 6%, the same -1/-1pct; the 24H1 net operating cash flow was 0.19 billion yuan, or -84%, of which the Q2 operating cash flow was 0.73 billion yuan, a significant increase over the previous year; 24H1 capital expenditure was 0.24 billion yuan, the same 31%, of which Q2 capital expenditure was 0.19 billion yuan, 76% year-on-year; inventory at the end of 24Q2 was 4.45 billion yuan, 3% compared to the end of Q1.

Profit forecast and investment rating: Due to the gradual recovery of overseas packaging foil profits, we have raised the company's profit forecast for 2024-2026. We expect net profit to be 0.54/0.66/0.86 billion yuan in 2024-2026 (originally estimated at 0.4/0.6/0.85 billion yuan), +1% YoY, corresponding PE of 15x/12x/9x, given a target price of 12 yuan to maintain the “buy” rating.

Risk warning: Prices of raw materials continue to rise, battery foil production expansion falls short of expectations, and competition intensifies.