occurrences

The company released its 2024 three-quarter report. In the first three quarters of 2024, the company achieved operating income of 2.007 billion yuan, a year-on-year increase of 33.13%; net profit attributable to shareholders of listed companies was 53.7708 million yuan, a year-on-year decrease of 36.24%. Among them, the third quarter of 2024 achieved operating income of 0.67 billion yuan, up 26.69% year on year, down 0.37% month on month; net profit attributable to parent company owners was 21.0752 million yuan, up 6.48% year on year and 49.92% month on month. In the third quarter of 2024, the company's gross margin was 26.28%, up 3.82 pct from the second quarter, and the company's net margin was 3.14%, up 1.05 pct from the second quarter.

Incident reviews

The new project was put into operation and fixed, and sales performance entered a period of climbing. Since the second half of 2023, the company's ongoing projects have been upgraded one after another, and new projects have been put into operation to drive the company's revenue growth. In the third quarter of 2024, the company's projects under construction were 0.603 billion yuan, a decrease of 0.36 billion yuan compared to the interim report. This is mainly due to the fact that the production lines of the current PET3 line, PVD magnetron sputtering film project and some functional tape projects reached the intended state of use and some supporting facilities were completed and transferred to fixed assets. As the fourth quarter enters the peak consumer electronics season, the recovery in downstream demand is expected to support the company's performance.

The OCA market is about 28 billion yuan, and the new folding equipment technology represented by tri-folding is expected to drive demand for OCA optical adhesives. OCA optical glue is a special adhesive used to bond transparent optical components (such as display covers, touch panels, etc.). The silver film chain predicts that the global demand for OCA optical adhesives in 2023 will be 0.353 billion square meters, with a market space of about 28 billion yuan. Compared with traditional straight-plate phones, the screen display area of folding screen phones is increased by about 50%, the flexible display screen structure has more layers, and the amount of stand-alone OCA adhesive used in folding screen phones will increase dramatically. On September 20, 2024, the Huawei tri-folding phone was officially launched.

In addition to three-folding, there is still room for development of new folding technology. For example, Honor's invention patent revealed the cross folding scheme. At present, the company's products have achieved stable mass production for some mainstream domestic terminal customers, and it is expected to benefit from the rapid growth in global demand for folding screen phones.

Investment advice

We predict that from 2024 to 2026, the company will achieve revenue of 2.734/3.642/4.528 billion yuan, a year-on-year increase of 38.9%/33.2%/24.3%; net profit to mother of 0.091/0.174/0.29 billion yuan, an increase of 62.6%/91.0%/66.6% year-on-year, corresponding EPS of 0.2/0.38/0.64 yuan, PE 65.6/34.4/20.6 times, maintaining the “increase in holdings” rating.

Risk warning

Downstream demand recovery falls short of expectations; new product development falls short of expectations; increased risk of industry competition; risk of fluctuating raw material prices; risk of lifting the ban on restricted stocks: According to Wind, the ban on restricted stocks, which account for 37.8% of the total share capital, will be lifted on November 25, 2024.