In 2022, the net profit of the mother was 332 million yuan, a year-on-year decrease of 42.24%. The company announced that it achieved revenue of 5.512 billion yuan in 2022, an increase of 8.77% over the previous year; realized net profit of 332 million yuan, a decrease of 42.24% over the previous year; and achieved net profit of 303 million yuan after deduction, a decrease of 44.74% over the previous year. Among them, 4Q2022 achieved revenue of 1,298 million yuan, a year-on-year decrease of 6.51%; realized net profit of 501 million yuan, a decrease of 60.38% over the previous year; and achieved net profit of 48 million yuan after deduction, a decrease of 61.92% over the previous year.

Product gross margin declined overall, and exchange gains and losses affected financial performance. In recent years, the polyester industrial yarn industry has expanded significantly. Coupled with factors such as poor growth in downstream automobile consumption, the decline in the price of polyester industrial yarn, especially ordinary yarn, has had a certain impact on the company's profits. In 2022, the gross margins of the company's main products, polyester industrial filament, tire curtain cloth, and light box advertising materials, were 16.29%, 26.71%, and 17.57% respectively. Apart from a slight increase in light box advertising materials, the gross margins of industrial wire and curtain cloth all declined to varying degrees. In addition, the company experienced a net exchange profit and loss of 26 million yuan throughout the year, which led to a sharp rise in financial expenses. The year-on-year increase was as high as 140.67%, which had a great impact on the company's performance.

Production capacity for polyester yarn and curtain cloth continues to be released, and the recovery in downstream consumption is beneficial to the company's development. As global automobile ownership and production increase and emphasis on automobile safety increases, the application of polyester industrial wire in automobile safety fields such as tire drapes, seat belt wires, and airbags will continue to be an important growth point in the future. The company grasped the opportunity for recovery in the downstream market. On the one hand, it actively promoted the construction and release of new production capacity. The Vietnam factory's 110,000 ton industrial wire project has put into operation 79,000 tons, and the remaining production capacity will gradually be put into operation depending on the situation. The last curtain cloth production line for the technical improvement project of 40,000 tons of automotive industrial yarn and 30,000 tons of high-performance tire curtain cloth technology improvement project has completed installation and commissioning for trial production; on the other hand, the development of new products and the certification of samples for new customers has been stepped up. We believe that the long-term international layout of the Vietnamese factory has obvious advantages, and that the company's production capacity and customer certification go hand in hand, which may lead to an inflection point in performance.

The transformation of the plastic materials business has accelerated, and photovoltaic reflective film materials have ushered in a verification cycle. The company's advertising materials lead the global market share and brand awareness. At the same time, the company actively uses new industrial composite materials as a new direction for future development and transformation. Some of its products have been successfully used in large-scale warehousing, sports and entertainment buildings, environmental engineering, etc. At present, the two production lines of the high-end rolled film project with an annual output of 47,000 tons have successfully completed equipment installation and commissioning. Furthermore, the company strategically laid out the new energy photovoltaic industry and relied on perfect technological development and production capabilities to develop reflective film materials on the basis of technological innovation of the original coating materials, and obtained a patent for the invention of reflective film. If the above transformation is carried out smoothly, it will bring new growth space to the company.

Investment suggestions: The company is a leading domestic polyester company differentiating yarn. Vietnam's factory layout has long-term strategic advantages. The reflective film achieves the layout of the new energy photovoltaic industry, and future performance development will benefit from rapid growth in downstream development. We expect the company to achieve net profit of 465 million yuan, 601 million yuan and 651 million yuan in 2023-2025. EPS will be 0.40 yuan, 0.51 yuan and 0.56 yuan respectively, and PE corresponding to the closing price on April 3 will be 15, 12 and 11 times, respectively, maintaining the “recommended” rating.

Risk warning: Product prices fluctuate, downstream demand falls short of expectations, and industry competition intensifies.