Description of the event

Haiyou New Materials released its 2024 three-quarter report. The first three quarters of 2024 achieved revenue of 2.053 billion yuan, a year-on-year decrease of 48.02%; of these, 2024Q3 achieved revenue of 0.564 billion yuan, a year-on-year decrease of 63.57%, a year-on-year decrease of 7.73%; and net profit to mother of -0.11 billion yuan.

Incident comments

The company's Q3 film sales are expected to remain flat month-on-month, with POE products accounting for a relatively high proportion. Due to the decline in the price of EVA and POE resins and the supply and demand pattern of the industry, the price of adhesive film dropped significantly year-on-month. Q3 The company's gross margin was -3.08%, a slight increase of 0.29pct over the previous month. The cost rate for the Q3 period was 10.60%. Although it is at a historically high level, the absolute value of expenses for the period declined quarterly, indicating that the company strengthened cost control. Q3 The net profit of a single flat sheet of adhesive film is expected to remain flat from month to month.

Other financial indicators include inventory of 0.239 billion yuan at the end of Q3, down -0.169 billion yuan from the end of Q2; notes receivable and accounts receivable at the end of Q3 were 1.479 billion yuan, down 0.246 billion yuan from the end of Q2. Q3 Net operating cash flow was $0.241 billion, mainly due to optimized inventory turnover, reduced cash required to purchase goods and receive labor payments for raw materials, and a decrease in accounts receivable balances. Q3 Asset impairment losses are about -0.027 billion yuan, which is expected to be mainly due to falling inventory prices.

Looking ahead, the company established a strategic partnership with Fuller of the United States to grant technical licenses for Fuller's designated adhesive film products. The latter can use the adhesive film formula and technology specified by the company to produce and sell adhesive film in the US, and pay the technical license fee at the rate agreed by the company. The agreement is valid for 5 years. The above cooperation is expected to help promote the company's adhesive film products in the US, accelerate the company's international industrial layout, and enhance the profitability and competitiveness of the adhesive film business. There is a steady supply of XPO leather this year, and new car series will also use XPO leather after Q3. At the same time, PDCLC LCD dimming film is likely to become a trend in future automotive applications. It has been selected for models to be launched in June next year, and preparations are currently underway.

We expect the company to achieve profit of 0.17 billion yuan in 2025, corresponding to PE 21 times. Maintain a “buy” rating.

Risk warning

1. Deterioration of the competitive landscape;

2. PV installation falls short of expectations.