Key investment points

Core logic: The company is a leading domestic optical film company, and its product layout has expanded from display to photovoltaics and other fields. Quantum Dots/Mini TVs, in-vehicle displays, etc. are increasing demand for optical films, and high-end optical films are growing rapidly. In the field of photovoltaic auxiliary materials, the backplane and film industry is fiercely competitive, and innovative products such as gap reflective films increase profits.

Optical film has a wide range of applications, and leading domestic manufacturers have plenty of room to advance. The company is a leading enterprise in the field of optical film for display backlighting in China, and there is plenty of room for future expansion. 1) The field of application of display technology continues to develop, driving the expansion of the upstream optical film market. For example, quantum dot TVs, mini LED backlit TVs, and in-vehicle displays have increased demand for high-end optical films such as quantum dot films; 2) Technological innovation has promoted the iteration of traditional films to high-end films, such as high-end products such as composite films and COP; 3) Domestic manufacturers have entered technology, improving product competitiveness, and achieving import substitution in the field of high-end optical films.

High-end optical films have returned to high growth, leading to a marked increase in profitability. The company's composite film achieved revenue of 0.4 billion in 2024H1, a year-on-year increase of 57%, and returned to high growth, accounting for 62% of revenue, making it the leading product.

It also led to a sharp increase in optical film gross margin of 6.2 percentage points to 32.0%.

Home appliance consumption support policies have stimulated a sharp increase in demand for high-end optical films. The Ministry of Commerce issued the “Notice on Further Accomplishing the Trade-In Work of Home Appliances” in August, which provides trade-in subsidies for the purchase of household appliances that meet energy efficiency requirements. The results of the policy were immediate. The sales volume and penetration rate of Mini LED TVs increased dramatically, which is expected to drive a sharp increase in demand for composite films, and JiZhi Technology is expected to benefit significantly.

Competition in the field of photovoltaic auxiliary materials is relatively fierce, and innovative products such as gap reflective films increase profits. The company's photovoltaic material products are mainly photovoltaic backpanels, gap reflective films, adhesive films, etc. 1) The company's photovoltaic backplane business has begun to take shape, and the gross margin is at the highest level in the industry; 2) Gap reflective film can improve module power generation efficiency by 1.5%-2%. The company has entered many leading module companies, and currently has few suppliers and good profitability; 3) The company's photovoltaic film scale is still small, but the profitability is poor due to industry competition.

Profit forecasting and valuation

We expect the company's net profit to be 0.21, 0.27, and 0.35 billion yuan respectively in 2024-2026, with year-on-year increases of 48%, 28%, and 26%, respectively. Corresponding PE is 23, 18, and 14 times, respectively. The company's new product strategy significantly increased profitability. It gave 2025 25 times PE, corresponding to a target price of 25.98 yuan, covered for the first time, and gave it a “buy” rating.

Risk warning

Increased industry competition; risks posed by major downstream customer operations and procurement; declining demand in the consumer electronics market.