Description of the event

The company released its 2024 mid-year report: achieved revenue of 2.217 billion yuan in the first half of the year, a decrease of 9.6%; realized net profit of 0.042 billion, a decrease of 47.6%; realized net profit without deduction of 0.03 billion yuan, a decrease of 266.5%.

Equivalent to Q2, we achieved revenue of 0.954 billion yuan, a decrease of 19.5%; realized net profit of 0.028 billion, a decrease of 43.1%; realized net profit without deduction of 0.001 billion yuan, a decrease of 97.8%.

Incident comments

Operations were under pressure in the first half of the year. The company achieved revenue of 2.217 billion in the first half of the year, down 9.6% from the same period. According to segmented financial data, revenue from the new display sector decreased by 32.9% year on year, and revenue from the applied materials sector decreased by 23.2% (during the same period, there may be a parallel impact of caliber adjustments). The first half of the year showed that consumer market demand continued to be under pressure; market prices for fused zirconium series products in the applied materials sector fell from a high level. The gross profit margin for the current period was 15.8%, up 0.5 pct from the previous year. Among them, the gross margin of applied materials decreased by 2.2 pcts to 18.8% (or the combined effect), and the new model showed an increase of 6.6 pcts to 14.4%. The rate for the period increased 2.4 pcts to 15.3% year over year, with management, R&D, and finance rates increased by 0.3, 0.8, and 1.0 pct respectively; government subsidies increased in the current period, and other income increased by about 35 million year on year; fixed asset disposal profits were about 33 million during the same period, none in the current period; finally, the net interest rate was 1.9%, down 1.4 pcts year on year.

Q2 Gross margin improved markedly. In Q2, revenue fell 19.5% in a single quarter, and demand in the consumer electronics industry is still under pressure. The Q2 gross profit margin was 17.7%, down 0.1 pct from the previous year; the rate for the period was 15.4%, up 3.0 pcts, of which sales, management, and finance rates increased by 0.5, 0.9, and 2.5 pcts. His earnings increased by 22.32 million to 36.2 million year over year, mainly due to the increase in current government subsidies; ultimately, he achieved a net vested interest rate of 2.9%, a decrease of 1.2 pcts year over year.

Applied materials continue to break through. The civil construction and plant of the company's 5,000-ton semiconductor silicon dioxide production line project have been completed, the installation of static equipment and moving equipment has been completed, and the installation of electricity, instruments, and valves has basically been completed. It is expected that pipeline cleaning and equipment commissioning will begin in September, aiming for commissioning with materials in October. The product side has developed electronic grade high-purity spherical silicon dioxide materials, optical coating materials, and high-performance spherical SiO2 materials in the field of special coatings in the high-end polishing and packaging industry, which have been verified by domestic and foreign customers and applied for multiple invention patents; research on the preparation of highly popular spherical silicon oxide powder using EMC has been carried out; and industrial production technology for electronic grade high-purity ultrafine silicon oxide powder has been developed.

New displays continue to break through. The company's ultra-thin flexible glass one-time molding project completed demonstration line infrastructure construction, and the installation and commissioning of core thermal equipment is being carried out; UFG of unequal thickness flexible glass has initially completed process technology development and samples have been produced; samples of microcrystalline glass flexible cover products have been prepared, and various performance indicators have met expectations; breakthroughs have been made in key material technology for screen targeted sound generation and key material technology for medium-free imaging; the automotive thermal bending 3D cover technology has been successfully tested.

Investment advice: Looking forward to the expansion of the company's new materials business category and the release of UTG covers. It is estimated that in 2024 and 2025, net profit of 0.12 and 0.19 billion, corresponding to PE 107 or 66 times, will maintain the purchase rating.

Risk warning

1. Demand for consumer electronics continues to be sluggish;

2. Low expectations for the new material production line to be put into operation.