Event: the company issues a half-year performance forecast for 2023. In the first half of 2023, the company is expected to achieve a net profit of 18.5-24 million yuan, turning losses into profits compared with the same period last year; deducting non-return net profits of 20-3 million yuan, turning losses into profits over the same period last year. Among them, 2023Q2 is expected to achieve a net profit of 5.42 million to 10.92 million yuan, a year-on-year turnround to profit, down 16.4% to 58.5% month-on-month; it is expected to realize a net profit of 346-4.46 million yuan after deducting non-return, turning losses into profits compared with the same period.

Consumer electronics paint stabilized, photovoltaic insulation glue volume, 23H1 to achieve deduction non-profit. In the first half of 2023, the company's PCB photoresist products developed steadily, the consumer electronics coating business gradually stabilized, superimposed by the gradual decline in the price of upstream raw materials, we expect the gross margin of 23H1's traditional business products to pick up year-on-year. In addition, 23H1 photovoltaic insulating glue and other solar photovoltaic materials in the field of new products began to gradually increase, but also for the company's performance to provide an increment. Photovoltaic insulating adhesive products are also products that the company achieved breakthroughs and rapid growth in the photovoltaic field in 2023. Benefiting from the gradual stabilization of the company's traditional product management and the volume of new products, 23H1 has turned its net profit from loss to profit after deducting non-profit. At the same time, during the reporting period, the company promptly disposed of loss assets such as Shanghai Chuangxing and restricted assets, and implemented measures to reduce costs and increase efficiency on the existing operating base, which effectively improved the overall expense rate of the company and strengthened the overall strength of the company. In the first half of 2023, the company expects non-recurrent profit and loss to be about 16 million yuan, mainly from the disposal of non-current assets, government subsidies, investment income from transactional financial assets, and so on.

We will speed up the construction of Longnan base and lay out new products in the field of photovoltaic and new energy vehicles. The company's planning and construction in Longnan base has a capacity of 38,000 tons / year for all kinds of photoresist and 120,000 tons / year for resin. It is estimated that some products will reach the trial production conditions in 2023. In the field of photovoltaic, in addition to the photovoltaic insulating adhesive products mentioned above, the research and development of photovoltaic photovoltaic adhesive products is being carried out in an orderly manner. It is in the process of docking, sending samples and testing with a number of head solar photovoltaic module enterprises and related equipment enterprises. In the field of new energy automotive coatings, the products of Jiangsu Hongtai, a subsidiary of the company, can be used in lamp wheels, PC surface hardening treatment, non-metallic internal and external decoration painting and so on. At the same time, the company's automotive paint products have also entered BYD, Geely, BAIC, Changan and other terminal mainframe plants.

Profit forecast, valuation and rating: thanks to the stabilization of traditional products such as PCB photoresist and consumer electronic coatings and the release of new products such as photovoltaic insulating glue, 23H1 has turned a profit from the same period last year. However, considering that the expansion of the company's new capacity is slower than previously expected, we have lowered the company's 23-24 profit forecast and added 25-year profit forecast. It is estimated that the company's return net profit in 23-25 is 0.45 (down 16.7%) / 0.70 (down 30.0%) / 101 million yuan respectively. With the completion of the company's Longnan base and the breakthrough of the company's products in high value-added new application areas such as photovoltaic and new energy vehicles, the company's operating situation is expected to continue to improve and maintain the company's "overweight" rating.

Risk hints: production capacity construction is not as expected, downstream demand is not as expected, product research and development risk, product verification risk, product new application field breakthrough is not as expected, goodwill impairment risk.