Incident: The company released its 2024 quarterly report, achieving revenue of 363 million yuan, +17.87%, and -18.48% month-on-month; net profit to mother of 53 million yuan, +69.19% year-on-year, and -35.89% month-on-month.
The performance was in line with expectations. 24Q1 net profit declined a lot from month to month, mainly due to: 1) After Samsung obtained small-batch orders in 24Q1, the base film production line conversion affected costs; 2) R&D expenses increased 98.02% year on year, mainly due to increased investment in R&D and trial production of new domestic materials to replace electronic grade films such as high-end polyester films.
Gross profit margin increased year over year, and R&D expenses increased significantly year over year. 1) Gross profit margin: In 24Q1, the company's gross margin was 39.22%, +6.81 pct year over year and +3.27 pct month over month. The main reasons for the significant year-on-year increase in gross margin: a recovery in downstream demand, a year-on-year increase in the operating rate and a decrease in the price of wood pulp as a superimposed raw material; the main reason for the month-on-month increase: 23Q4 drilling equipment had a short customer certification period after moving to a new factory area, which affected production efficiency and in turn affected gross margin levels, and 24Q1 production efficiency recovered. 2) Period expenses: The 24Q1 company's expenses rate was 23.61%, +3.75 pct year on year, of which sales, management, R&D, and finance expenses were 2.21%, 9.86%, 10.65%, 0.89%, +0.09, +0.69, +4.31, and -1.34pct year over year.
High-end release films are progressing smoothly, creating a second growth curve. The company's MLCC release film has achieved stable batch supply to major customers such as Guoju, Huaxinke, Fenghua Hi-Tech, and Sanhuan Group, while progressing smoothly for major Korean and Japanese customers. Among them, Japanese customer Murata is in the small-batch trial phase and is expected to gradually increase; Korean customer Samsung has basically completed the main testing process and has already obtained small-batch orders. The next step is to enter the gradual volume supply stage, which is expected to become the company's second growth curve. In addition, based on the company's development plan, taking into account new changes in the market, customer needs, and the company's product and business layout, the company increased the release film production capacity of the South China industrial research headquarters project, the Zhaoqing production base in Guangdong, from the original planned annual production capacity of 100 million square meters to an annual production capacity of 200 million square meters. The first line of these was already in trial production at the end of 2023, and the second line is being installed. Once production capacity is released, it is expected to further contribute to the increase in performance.
Profit forecast: Net profit of 3.48, 4.61, and 596 million yuan is expected for 24-26, maintaining the “buy” rating.
Risk warning: Downstream demand recovery falls short of expectations; risk of new business expansion falling short of expectations; risk of release of new production capacity falling short of expectations; risk of price fluctuations of major raw materials.