In the context of cyclical excess capacity in the panel industry, Oulei New Materials' performance is under pressure, as reported on November 6th by the Science and Technology Innovation Board Daily (Reporter Wu Xuguang).

At the earnings conference for the third quarter of 2024 held today (November 6th), Ma Chunhai, Vice General Manager and CFO of Oulei New Materials, stated that there is a certain cyclicality in the panel, semiconductor, and upstream industry chain. "Affected by the domestic and international economic environment in recent years, the demand for consumer electronics and panels has also been greatly impacted, and the panel industry faces the issue of cyclical excess capacity."

According to the financial report, Oulei New Materials' revenue in the first three quarters decreased by 22.63% year-on-year to 0.297 billion yuan; net income attributable to the mother decreased by 77.38% to 9.8746 million yuan. In Q3 alone, a loss of 5.71 million yuan was incurred, turning from profit to loss year-on-year.

Regarding the performance change, Oulei New Materials stated that it was mainly due to reduced shipments of target materials and waste, as well as price reductions on some products. The high-end sputtering target material production base project (Phase I) investment project has started production, the construction of the high-purity oxygen-free copper production base project is accelerating, leading to increased operating costs such as asset depreciation, without realizing benefits in the short term.

During the earnings conference, Wen Hongfu, Chairman, General Manager, and Chief Technology Officer of Oulei New Materials, stated that due to customer demand, the sales volume of copper and aluminum targets for flat panel displays in the first three quarters of 2024 has decreased to a certain extent. "However, as we enter the fourth quarter, product sales prices have stabilized."

Facing the short-term shrinkage of downstream market demand, Oulei New Materials has taken countermeasures.

Ma Chunhai stated that firstly, the company has been continuously investing in the research and development of semiconductor target materials, and has successfully entered the integrated circuit packaging material supply system of well-known semiconductor manufacturers such as Unisem and SK Hynix; secondly, the company is expanding into broader downstream application areas, optimizing product structures, developing new types of molybdenum alloy target materials, diverse aluminum alloy high-purity semiconductor target materials, and extending towards the upstream of the industry chain to expand new materials business such as high-purity materials, copper, and alloys.

In terms of landing effects, Wen Hongfu stated that the selling price of the company's ITO target material is affected by factors such as raw material prices and market competition, and the shipment price has increased overall compared to last year; in terms of shipment, the company's ITO target material has currently passed certification by some panel factories and is being supplied in bulk.

In addition, in terms of the fund-raising projects, discussing the latest progress of the company's IPO initial fund-raising projects such as the "semiconductor integrated circuit target material research and development pilot production base project", independent director Lou Chao of Oulei New Materials stated that the "high-end sputtering target material production base project (Phase I)" was put into operation on September 5, 2024, and production operation is progressing orderly and steadily; after the completion of the main construction of the "high-purity oxygen-free copper production base construction project", interior installation and factory area supporting facility construction are in progress, the first batch of production equipment has been delivered, and it is in the installation and commissioning phase; the "semiconductor integrated circuit target material research and development pilot production base project" is a research and development project, and currently the project is steadily progressing and being implemented.

It should be noted that against the backdrop of unstable demand in the current industry, on September 20th of this year, Oulei New Materials announced that the company plans to build the Mingyuehu Industrial Park project in Shaoguan High-Tech Zone, with a total investment of approximately 2.59 billion yuan, attracting high market attention.

"In the long run, the demand for domestic new materials will continue to grow." Regarding the prospects of the project construction, Wen Hongfu stated that the Mingyuehu Industrial Park project is an implementation of the company's future development strategic plan. On the one hand, it can stabilize the main business of high-performance sputtering target materials; on the other hand, it can expand the upstream industry chain of high-purity materials, copper, and alloy new materials business.

Of particular concern is the issue of the source of funds for the construction of the Mingyuehu Industrial Park project. At the earnings conference, an investor asked, "The company's current total assets are 1.006 billion yuan, how will the funding issue be resolved?"

Wen Hongfu stated that the project covers a complete chain of "research and development - pilot - industrialization", with a relatively long cycle. In the initial stage of the project, the company plans to raise funds through various means: own funds and profits earned later; bank loans, etc.; at the industrialization stage of the project, consideration will be given to raising funds through various channels such as introducing government, other market-oriented funds, and capital markets financing.

"Will the implementation of the Mingyuehu Industrial Park project increase the leverage of the company's fund utilization?" In response to investors' follow-up questions, Mao Chunhai stated that as of September 30, 2024, the company's debt ratio was 16.14%, lower than that of companies in the same industry. The company adheres to a prudent operating policy, strengthens cost control, optimizes asset structure, and ensures that the debt ratio is at a reasonable level.