The company's quantum dot film, composite film, solar backplane film and other products continue to expand, and the performance has entered a period of rapid growth. We maintain the company's net profit forecast of 2.54 pounds per share in 2021-2023, corresponding to 1.09 pounds per share and 1.33 pounds per share, corresponding to EPS of 1.03 billion yuan per share. With reference to the industry comparable company valuation and the company's historical valuation, we believe that 40 times PE in 2022 is a reasonable valuation of the company, corresponding to the target price of 53 yuan and maintaining the "buy" rating.

The net profit of homecoming in the first half of 2021 increased by 62.36% compared with the same period last year. In the first half of 2021, the company achieved revenue of 846 million yuan, + 54.84% year-on-year; net profit of 64 million yuan, + 62.36%; and non-return net profit of 56 million yuan, + 97.62% of the same period last year. Among them, Q2 achieved revenue of 465 million yuan in 2021, + 56.36% year-on-year and + 21.95% month-on-month, and realized net profit of 31 million yuan, + 46.53% year-on-year and-4.04% compared with the same period last year. In terms of products, the revenue of the optical thin film was 561 million yuan, + 26.71% year-on-year, and the gross profit margin was 26.85%. Compared with the same period last year, the revenue of 1.53 pct; solar backplane films decreased by 1.53 yuan, the gross profit margin was 15.93%, and the gross profit margin was 15.93%, which was 3.45 pct lower than the same period last year.

In the first half of 2021, the rate of four expenses decreased by 1.49 pct, and the net cash flow decreased. In terms of expense rate, the company's sales rate in the first half of 2021 was 1.81%, 5.27% lower than 3.29% in the same period last year, 1.73 pct; financial rate 2.07% higher than 3.54% in the same period last year, and 0.12 pct lower than 2.19% in the same period last year. The R & D rate was 6.30%, 1.63 pct lower than 7.92% in the same period last year, and the R & D investment was 53 million yuan, + 23.06% compared with the same period last year. The total rate of four fees was 15.45%, 1.49 pct lower than 16.94% in the same period last year. In terms of cash flow, the net cash flow generated by operating activities in the first half of 2021 was-28 million yuan, a decrease of 162 pct compared with the same period last year, mainly due to the expansion of operation scale and the increase of stock reserves.

The growth of high-end optical films has been accelerated, and the structure of optical films has been continuously optimized. As an early domestic enterprise engaged in R & D, production and sales of display optical film, the company is based on the most advanced production technology and material science. "to become the world's largest, most profitable and most respected functional film company" as the development goal, since its inception through independent research and development, equipment transformation and process innovation to break through the diffusion film and brighten the film mass production It is also one of the few companies to achieve stable production and supply of quantum dot film, COP and composite optical film in China, and the product quality is in the international leading level. In the first half of 2021, the company's quantum dot film, composite film and COP products increased by 95.50%, diffusion film increased by 24.96%, brightening film was basically flat compared with last year, the proportion of high-end optical film continued to increase, and the product structure was further optimized. The improvement of the permeability of high-end display technologies such as quantum dots and Mini-LED has led to the rapid growth of the company's high-end optical films, and the company has actively promoted and optimized a composite film to replace brightening film and diffusion film assembly, saving labor for downstream customers and further thinning the backlight module.

Display field forward-looking layout, functional film platform initially expanded. While maintaining the leading position of optical display materials, the company actively promotes the mass production of new products and the R & D and testing of functional thin film products in emerging areas. At present, the company's backplane membrane products have been delivered to a number of leading companies in the component industry, TPO, transparent backplane and other new products have also passed Jingke, Longji and other customer verification and mass production delivery. As one of the few decorative film suppliers in China, the company has mass produced in two new energy models. OCA optical adhesive has initially reached mass production capacity and will provide high-quality OCA optical adhesive products to the company's downstream customers. The company also actively distributes the market of small-size optical film products, and has passed a number of brand machine certification in the first half of the year. It is expected that small-size optical film will contribute more profits to the company in the next few years. In addition, the company's new layout products also include Mini-LED evenly light film, fluorescent film (RG film), solar packaging film, etc., as well as investment layout in the fields of PET base film, LCP material, OLED material, silicon-based OLED micro display technology and so on. The rapid mass production and sales of new products reflect the company's leading technology, advanced production management level and strong ability to expand the downstream market.

Risk factors: shrinking downstream demand; intensified market competition; less-than-expected new business expansion; raw material price fluctuations.

Investment suggestion: the company's quantum dot film, composite film, solar backplane film and other products continue to sell volume, and the performance has entered a period of rapid growth. We maintain the company's net profit forecast of RMB 2.54 trillion for 2021-2023, corresponding to an EPS of 1.03 trillion yuan per share. With reference to the industry comparable company valuation and the company's historical valuation, we believe that 40 times PE in 2022 is a reasonable valuation of the company, corresponding to the target price of 53 yuan and maintaining the "buy" rating.