The company released its 2024 three-quarter report. Losses for the first three quarters increased year-on-year, the company's gross sales margin gradually stabilized, and the recovery in component demand is expected to drive up film profits. Maintain an increase in holdings rating.

Key points to support ratings

Losses increased year-on-year in the first three quarters of 2024: the company released the 2024 three-quarter report. In the first three quarters, the company achieved operating income of 2.053 billion yuan, a year-on-year decrease of 48.02%; realized net profit to mother of -0.249 billion yuan, an increase in losses year-on-year; realized deducted non-net profit of -0.253 billion yuan, and losses increased year-on-year. According to performance calculations, 2024Q3 achieved net profit to mother of -0.11 billion yuan. Losses increased year-on-year and decreased losses month-on-month.

The company's gross sales margin rebounded steadily: in the first three quarters of 2024, the company achieved a comprehensive gross profit margin of -0.21%, a year-on-year decrease of 5.18 percentage points; a comprehensive net profit margin of -12.11%, a year-on-year decrease of 10.20 percentage points. Among them, 2024Q3 achieved a gross profit margin of -3.08%, an increase of 0.29 percentage points over the previous month; a net profit margin of -19.56%, a decrease of 0.04 percentage points over the previous month.

The price of EVA particles fluctuates at a low level, and future film profits are expected to recover: According to Wind data, the price of EVA particles has basically remained fluctuating at a low level of 0.01 million/ton since 2024. We believe that the main reason affecting the company's gross margin is that the sales price of EVA film is under pressure. As demand for terminal components picks up, an increase in film prices and an increase in the company's operating rate are expected to drive gross margin restoration.

Technology drives continuous film iteration, and the company continues to optimize film formulations: the company's EPE+EVA film packaging solution for TopCon has achieved stable supply. In terms of new technology, the company has successfully developed coating products such as skin masks for 0BB components, which can provide customers with different technical routes with differentiated 0BB coating solutions such as EPE+ skin mask, EVA+ light transfer film, EPE+EPE, etc., which have been tested by some customers and are continuously verified. At the same time, the company has also made significant progress in technological transformation plans to speed up equipment.

valuations

Considering that the decline in the price of EVA particles is driving down film prices and the release of production capacity in the EVA film industry, we adjusted the company's 2024-2026 earnings forecast to -3.47/1.50/2.52 yuan (the original forecast earnings per share for 2024-2025 was 1.76/2.54 yuan), corresponding price-earnings ratio of 28.8/17.2 times for 2025-2026; currently, the price of EVA particles is stabilizing in stages, and the company's profit is expected to recover and maintain an increase rating.

The main risks faced by ratings

Raw material costs fell short of expectations; price competition exceeded expectations; risk of international trade friction; risk of technological iteration; policy did not meet expectations.