The company released its annual report for the year 23, achieving revenue of 3,902 billion yuan, a year-on-year increase of 5.05%; net profit to mother of 299 million yuan, an increase of 2.41%; net profit after deducting non-attributable net income of 255 million yuan, a year-on-year decrease of 6.75%. Among them, 23Q4 achieved revenue of 814 million yuan, down 1.95% year on year and 19.10% month on month; net profit to mother of 2.96 million yuan, down 90.55% year on year and 95.91% month on month; net profit without return to mother - 25.44 million yuan, down 208% year on year and 137% month on month. The results fell slightly short of expectations.

Key points of investment

The price of photovoltaic adhesive is under pressure, and the company's Q4 profitability declined. The company's sales volume of silicone rubber, polyurethane glue and solar back film was 158,000 tons, 38,000 tons, and 68.34 million square meters respectively, up 54.1%, 32.0%, and 0.3% year-on-year respectively. Sales of major products increased dramatically. Among them, back films were affected by the double glass industry. The company's renewable energy/big electronics/big transportation revenue in '23 was 2.2 billion yuan, 550 million yuan, and 720 million yuan respectively, with year-on-year changes of +3.71%, -2.39%, and +28.03%, respectively. Against the backdrop of a year-on-year increase in product sales, the small increase in the company's renewable energy revenue is mainly due to the decline in prices in the photovoltaic industry chain. The company's gross sales margin in '23 was 22.82%, down 0.67 PCT year on year, mainly due to pressure on renewable energy profitability. In '23, the company's gross margin of renewable energy/electronics/electronics/transportation was 19.08% (-2.68 PCT)/33.36% (+0.54 PCT)/28.04% (+0.82 PCT), respectively. The company's net profit for 23Q4 declined month-on-month. We believe it was mainly due to a decrease in product profitability and an increase in financial expenses. The Q4 company's gross margin was 18.78%, down 5.41 PCT and 1.75 PCT, respectively. The company's net operating cash flow in '23 was 672 million yuan, an increase of 538 million yuan over the same period last year. In '23, the company's inventory turnover ratio was 5.75 and the accounts receivable turnover ratio was 4.33, both slightly increasing year over year.

Multiple projects are progressing steadily, and the volume of products can be expected in the future

As of '23, the company had a production capacity of about 210,000 tons of silicone, 65,000 tons of polyurethane glue, 25,000 tons of other gels, and 120 million square meters of solar cell back film. In '23, the company's Guangzhou 39,300 ton electronic adhesive project was put into operation. The company also completed the acquisition of 51% of Hualan's shares and accelerated the deployment of SBR anode adhesives. Furthermore, the company is currently constructing 44,000 tons of silicone in Hubei and 26 million square meters of backing film in Vietnam. We believe that as the company gradually releases 39,300 tons of electronic adhesive, Vietnam's high-value-added transparent grid backboards are gradually put into production, and the company's performance is expected to continue to grow.

Profit forecasting and valuation

The price of the company's photovoltaic glue was under pressure, and the company's net profit from 24-25 was lowered to 328/429 million yuan. The estimated net profit to mother in '26 was 516 million yuan, and PE corresponding to the current price is 12.90/9.86/8.20 times. We believe that as the company adds production capacity and starts production in an orderly manner, the company's industries such as electronic adhesives and transportation equipment adhesives are booming, and the company's future development can be expected, and the purchase rating will be maintained.

Risk warning

Product price fluctuations; customer development falls short of expectations; production capacity investment falls short of expectations, etc.