Description of the event
Haiyou New Materials released its 2022 annual report and 2023 quarterly report. The company achieved revenue of 5.3 billion yuan in 2022, an increase of 71% over the previous year; net profit attributable to the parent company was 50 million yuan, a decrease of 80% over the previous year. The first quarter of 2023 achieved revenue of 1.35 billion yuan, an increase of 10% over the previous year and an increase of 15% over the previous quarter; net profit attributable to the parent company was 23 million yuan, reversing losses.
Incident comments
In 2022, the market share of adhesive film increased, and fluctuations in particle prices weighed down profits. The company's film revenue in 2022 was 5.26 billion yuan, an increase of 72% over the previous year. The sales volume was 435 million square meters, an increase of more than 70% over the previous year. The market share increased further. Among them, Q4 sales are expected to be around 110 million square meters, with a flat or slight increase from month to month. The average annual film price was 11.7 yuan/square meter, a slight decrease from the previous year. The gross profit margin was 7.4%, down 7.5 pct from the previous year. Among them, Q4's film gross margin is expected to be around 3%. Excluding the impact of asset impairment and credit impairment due to factors such as falling inventory prices, the company's annual net profit per sheet of plastic film is 0.3-0.4 yuan/square meter, of which Q4 is expected to be around -0.3 yuan/square meter. The main reason for the loss in Q4 is that the price of adhesive film fell, and at the same time, the particles purchased at high prices in the early stages were not completely digested.
There was an improvement in the 2023Q1 volume profit. In 2023Q1, the company achieved revenue of 1.35 billion yuan, an increase of 15%. We expect that the main factor is that terminal demand will drive the company's production schedule after the Spring Festival. We expect Q1 to sell 120-140 million square meters of adhesive film, and the mobility rate will increase significantly after the Spring Festival. Q1 The company's gross profit margin was 6.3%. Excluding the recovery of asset impairment losses of 11 million yuan, net profit per square meter is expected to be around 0.1 yuan/square meter to reverse the loss. Since February, the price of adhesive film has continued to rise, and the average price of superimposed particle inventories has gradually declined, driving a recovery in profit levels.
Inventory pressure remains, and contract liabilities have increased sequentially in Q1. The company's expense rate during 2022 was 5.5%, a year-on-year decrease of 0.3 pct, reflecting the continued expansion effect of the company and the dilution of sales and management expenses. Net operating cash flow for the full year of 2022 was $2.9 billion, and Q1 2023 was -700 million. The decline in cash flow was mainly due to the expansion of the company's production scale and the continuous increase in operating capital. It is expected that improvements will be made after 2023 by improving operational efficiency, strictly controlling repayment cycles, and multi-channel financing. At the end of 2023Q1, the company's inventory was 1.35 billion, a slight increase over the previous month. It is expected that it will continue to be digested according to demand in the future; contract debt was 0.2 million, an increase of 122% over the previous month, and orders were quite abundant.
Looking ahead, the company expects to reach an inflection point in quantitative profit in 2023. Faced with fluctuating particle prices and common problems in the industry where profitability is under pressure, the company has steadily expanded. The annual production capacity is expected to be 90-950 million square meters, and the annual sales volume is expected to exceed 800 million square meters to achieve a market share of around 20%. At the same time, the company's particle supply capacity is second only to Foster. It has developed differentiated EXP products on N-type film. It has already been introduced by major customers, and it is expected that the structural excess profit of N-type film will be fully enjoyed in the future. The profit level can be expected to rise quarter by quarter throughout the year.
We expect the company's net profit to be 500 million yuan and 800 million yuan respectively in 2023-2024, and the corresponding PE will maintain the purchase rating 21 and 12 times, respectively.
Risk warning
1. PV installation falls short of expectations;
2. Market competition intensifies.