The company released its 2024 mid-year report, and the results were in line with expectations. In the first half of the year, the company achieved revenue of 2.88 billion yuan (YoY +3.9%), realized net profit of 0.19 billion yuan (YoY +10.4%), and realized deducted net profit of 0.187 billion yuan (YoY +3.4%); of these, 24Q2 achieved revenue of 1.496 billion yuan (YoY +5.4%, QoQ +8.3%), and realized net profit of 0.115 billion yuan (YoY +9.95%, QoQ +53.8%) to achieve deduction Net profit not attributable to mother was 0.111 billion yuan (year-on-year flat, QoQ +45.8%).

Ordinary silk continues to be in a state of refinement, but the company's product structure continues to improve. Combined with the increase in profits at the Vietnam base, gross margin has increased, and curtain cloth has benefited from an increase in tire demand. Overall, in the first half of the year, the company's gross margin increased slightly by 0.18 pct to 15.61% year on year, and the net profit margin increased 0.38 pct to 6.62% year on year. Among them, the second-quarter estimate was affected by factors such as shipping costs, and gross margin fell 0.97 pct year over year and increased 1.12 pct month over month to 16.15%. According to the announcement:

1) Polyester industrial yarn: In the first half of the year, polyester industrial yarn achieved revenue of 1.32 billion yuan (YoY -2.6%), mainly because competition for ordinary yarn was still fierce. According to Baichuan data, the company's average high-strength 1000D/192F and high-strength reduced 1000D/192F prices fell 7.8% and 7.1% year-on-year respectively in the first half of the year, but due to the company's continuous optimization of the product structure and the 0.11 million ton differentiated polyester industrial filament (phase I) project in the Vietnamese factory achieved full production and sales, which led to a year-on-year increase in the gross margin of polyester industrial yarn At 1.02pct to 16.3%, the Vietnam base achieved revenue of about 42.29 million yuan in the first half of the year. 2) Curtain cloth: Driven by tire demand, the tire curtain cloth business achieved revenue of 0.65 billion yuan (YoY +15.5%) in the first half of the year, and the company's domestic production capacity of 0.06 million tons of curtain cloth was fully sold. The gross margin is estimated to have declined slightly by 0.37 pct to 22.92% due to shipping. Furthermore, in the first half of the year, the company's 0.018 million ton high-performance tire cord Vietnam (Phase I) project has completed preliminary work such as initial design, planning, and layout. After production is put into operation, the global supply chain layout will be further optimized and reduced. The risk of trade friction enhances international competitiveness. 3) The remaining business segments achieved revenue of 0.271 billion yuan (YoY +6.2%), 0.212 billion yuan (YoY +27.7%), 0.157 billion yuan (YoY +26%), and 0.138 billion yuan (YoY +26%) in the first half of the year (basically the same as the previous year).

The advantages of Vietnam's base are expected to gradually become prominent. The company previously announced that the European Commission issued a final anti-dumping ruling on polyester high-strength yarn originating in China. Hailide's polyester industrial filament products exported to the EU will be subject to 6.9% anti-dumping duties, and other relevant Chinese enterprises will be subject to anti-dumping duties ranging from 9.7%-23.7%, so the company's Vietnam base advantage is expected to gradually become apparent. In addition, the company will implement a high-performance tire cord project with an annual output of 0.018 million tons in Vietnam, and plans to invest about 52 million US dollars. The initial design and layout work has now been completed, and it is expected that production will gradually be put into operation in 2025. Based on the advantages of the original PVC film business, the company's strategically arranged photovoltaic reflective material products are mainly used to enhance the efficiency of photovoltaic backplane power generation, and has obtained the first order in June 2021 for installation and use in foreign power plants. In addition, the company has spared no effort to accelerate the upgrading and iteration of photovoltaic reflective materials, help customers solve difficult problems and pain points through the provision of integrated solutions, accelerate the execution of orders from domestic and foreign customers, and promote industrialization and scale, which is expected to become the company's next growth driver.

Profit forecast and valuation: Maintain profit forecasts. Net profit to the mother is expected to be around 0.41, 0.46, and 0.53 billion yuan in 2024-2026, corresponding to about 10, 9, or 8 times PE, maintaining an “increase in holdings” rating.

Risk warning: Large fluctuations in raw materials affect profit levels; Vietnam's new product certification falls short of expectations; reflective film promotion falls short of expectations