The company's optical film product structure continues to optimize, photovoltaic backplane products are growing rapidly, EVE, EPE and POE packaging film products have achieved mass production, the long-term development is worth looking forward to. We maintain the company's 2023-2025 homing net profit forecast of RMB 114,167pm, corresponding to the 2023-25 EPS forecast of RMB0.43According to the company's historical valuation, we give the company 40 times PE (corresponding to the historical 14th quartile PE multiple) in 2023, corresponding to the target price of 17 yuan, and maintain the "buy" rating.

2023H1 revenue fell 5.20 per cent year-on-year, while net profit from home increased by 30.69 per cent. The company's 2023H1 realized revenue of 977 million yuan, year-on-year-5.20%; net profit of 50 million yuan, 30.69%; and non-return net profit of 29 million yuan, + 37.68% of the same period last year. The company's 23Q2 realized revenue of 562 million yuan in a single quarter, + 9.17% year-on-year, + 35.47% month-on-month; realized net profit of 22 million yuan, + 2975.55%,-22.72%; and deducted non-return net profit of 12 million yuan, + 303.38%, and-26.86%.

The decline in revenue in the first half of 2023 was mainly due to a year-on-year decline in sales in the optical and photovoltaic sectors.

The four-fee rate of 2023H1 increased by 0.19% over the same period last year, and the net cash flow from operating activities was-84 million yuan. From the expense side, the company's 2023H1 sales / management / R & D / financial expense rates are 1.65%, 3.69%, 7.05% and 1.09%, respectively, compared with the same period last year + 0.28/-0.88/+0.20/+0.60pcts. The total rate of four fees was 13.48%, an increase of 0.19pcts compared with 13.28% in the same period last year. The decrease in management expenses is mainly due to the decrease in share payments. From the perspective of cash flow, the net cash flow generated by the company's 2023H1 business activities is-84 million yuan,-287.19% compared with the same period last year, which is mainly caused by the preparation of raw materials from the plastic plate.

Backplane, plastic film and other photovoltaic products continue to volume, to create a functional film platform. In the first half of 2023, the company's backplane film (including transparent backplane for double-sided batteries) was delivered to a number of leading companies in the component industry, and its share in customers' component products increased. TPO, transparent backplane and other new products also passed the verification and mass production delivery of Jingke, Longji and other customers. The company increases the project packaging film factory in Anhui to build smoothly, product testing work is advancing rapidly, EVA and EPE (co-extruded POE) products have been mass produced. While maintaining the leading position in the optical film industry, the new products are successfully mass-produced and sold. In addition to the products that have been mass-produced or are about to be mass-produced, the company adheres to the research and development system of "production generation, R & D generation and reserve generation". The new products include barrier film, protective film, semiconductor film, medical film and other materials. In the follow-up development, the company will expand new products horizontally and create a functional film platform based on the core coating technology.

We will actively promote diversified investment layout and horizontally expand new development opportunities. 1) in terms of lithium ferromanganese phosphate, the company currently holds a 4.67% stake in Hengchuang Nano. Based on years of accumulation in the field of battery materials, Hengchuang Nano continues to develop new lithium battery materials, the first of which is lithium ferromanganese phosphate cathode material. Lithium ferromanganese phosphate has the characteristics of high energy density, high safety, long cycle life and environmentally friendly. 2) in terms of quantum dot diffusion board, the company invested to set up Zhejiang Xinzhi in the first half of 2023, and the company currently holds a 75% stake in Xinzhi. Zhejiang Xinzhi mainly produces diffusion plate, quantum dot diffusion plate, foaming board, quantum dot foaming board, microstructure plate, membrane plate and new functional board, which are widely used in backlight display modules and other products. 3) in terms of PC film, the company invested in Ningbo Gangzhi in 2022 and currently holds a 51% stake in Gangzhi.

Ningbo Port Zhi's main product is PC film, which has high-end multi-layer co-extruded film and sheet production line for manufacturing high-performance functional film products, which are widely used in new energy batteries, household appliances, automotive interior decoration and other fields. 4) in terms of display materials, the company has laid out quantum dot films, COP and OLED luminescent materials. The company's quantum dot film, COP and so on have successfully passed the verification of a number of customers, and have produced goods for some customers. The company has also invested in the layout of OLED luminous materials company Ningbo Lumilan New Materials Co., Ltd.

Risk factors: raw material price fluctuations; downstream consumer electronics demand is lower than expected; market competition intensifies; new product customer verification volume progress is not as expected.

Profit forecast, valuation and rating: the company's optical film product structure continues to optimize, photovoltaic backplane products are growing rapidly, EVE, EPE and POE packaging film products have achieved mass production, the long-term development is worth looking forward to. We maintain the company's 2023-2025 homing net profit forecast of $114,167pm, corresponding to the 2023-25 EPS forecast of 0.43pm 0.63pm, respectively. With reference to the company's historical valuation, we give the company 40 times PE (corresponding to the historical 14th quantile PE multiple) in 2023, corresponding to the target price of 17 yuan, and maintain the "buy" rating.