1H22 performance is in line with our expectations

The company announced 1H22 results, revenue reached 676 million yuan, with an increase of 51.3%, non-return net profit reached 22 million yuan, with an increase of 50.1%, in line with our expectations.

From a quarterly point of view, 1Q/2Q22 's revenue was 22.63 million yuan after deducting the non-return net profit of 60.8% of the company's income from the same period last year, reversing losses over the same period last year.

Trend of development

1. The photovoltaic film business is growing rapidly, and the traditional business is developing steadily under the disturbance of the epidemic. 1) Photovoltaic film: the business income of 1H22 photovoltaic film increased by 250.7% compared with the same period last year. The revenue of Magi 2Q22 increased by 376.1% compared with the same period last year and 52.9% compared with the previous year. We believe that although affected by the epidemic in Shanghai and other places in the first half of the year, the company relies on high-quality production capacity, expanding production capacity, efficient and stable manufacturing system, on the one hand, to increase the share of existing customers and production capacity, on the other hand, actively expand the top five customers in the industry to help its photovoltaic film business continue to rise at a high speed. 2) Wall cloth business: the product strength of the company's own brand "Tianyang Wall cloth" is outstanding. In the first half of the year, the company continued to promote new retail and omni-channel construction, and continued to enhance brand influence. 1H22 achieved 65 new development franchisees. Under the background of 20-30% decline in the epidemic disturbance industry, it still grew against the trend in the first half of the year. 3) Hot melt adhesive and electronic adhesive: the company's hot melt adhesive business has cooperated steadily with global head clothing interlining suppliers for many years, and is expected to maintain stability; electronic adhesive business will increase investment in research and development, and actively distribute new areas such as smart wear and automotive electronics. Q2 revenue increased by 5.9% in the context of the epidemic.

2. The profitability has been significantly improved, and remarkable achievements have been made in reducing costs and improving efficiency. From the point of view of gross profit margin, Q2 achieved a gross profit margin of 21.7%, a month-on-month increase in 5.2ppt. Against the background of a sharp rise in the cost of raw material EVA particles in the second quarter, the company actively raised the shipping price of photovoltaic film. Q2 photovoltaic film gross profit margin reached 21.5%, which increased 16.9ppt compared to Q1, helping to improve the gross profit margin. On the expense side, the Q2 company's sales / management + R & D / financial expense rates are 3.4%, 7.2%, 2.2%, respectively, and 5.4/5/0.4ppt is the same. The company actively improves management efficiency, optimizes the input of sales expenses, and dilutes the expense rate when the scale is increased. Under the comprehensive influence, the non-post-deduction net interest rate of Q2 reached 6.3%.

3, optimistic about the company as a hot melt adhesive leader, photovoltaic film, wall cloth and other high-growth business rapid rise trend, reiterate the TopPick. We expect: 1) the company's photovoltaic film products are of excellent quality and have been widely recognized by downstream customers such as Zhengtai and Dongfang Risheng, and the company is also actively expanding its production capacity, which is expected to form an annual production capacity of 160 million square meters by the end of this year. And rapidly expand production to 510 million square meters in 2024. With the decline in silicon prices and increased demand in the future, the company is expected to continue to obtain high-quality new customers and expand its share in the stock of customers. Faster than the average growth rate of the industry and the rise of high quality 2) with the continuous promotion of the company's wall cloth business channel construction and the continuous optimization of marketing, Tianyang brand is expected to comply with the continuous improvement of wall cloth permeability and the continuous rise of share to the head enterprise.

Profit forecast and valuation

Keep the earnings forecast of 2022Universe 2023 unchanged, the current share price corresponds to 2022Universe 2023 44x19x Pamp E, keep the outperform industry rating and target price unchanged at RMB 18, and correspond to 25x Pmax E in 2023, which has 29% upside compared to the current share price.

Risk

Terminal demand is lower than expected; new capacity is not as expected; raw material prices fluctuate; cash flow risk.