Incident: On August 23, the company released its 2024 semi-annual report. 24H1 achieved operating income of 10.764 billion yuan, +1.39% year over year; net profit to mother of 0.928 billion yuan, +4.95% year on year; net profit without return to mother of 0.899 billion yuan, +9.20% year over year. In the 24Q2 single quarter, the company achieved revenue of 5.442 billion yuan, -4.57%, and +2.27% month-on-month; net profit to mother 0.407 billion yuan, -21.79% year-on-year, -21.97% month-on-month.

Adhesive film shipments continued to grow, bucking the trend and expanding overseas production capacity. 24H1's PV film shipments were about 1.389 billion flat, +43.61% year over year, achieving revenue of 9.879 billion yuan, or +3.79% year over year; Q2 single quarter shipments were about 0.713 billion flat, +5.47% month-on-month. 24 Annual shipments are expected to be 2.6-2.8 billion flat, with a year-on-year increase of 20%-30%. The low price of adhesive film has led to a slowdown in revenue growth. The company compensates with volume, the market share of adhesive film shipments exceeds 50%, and the leading position in the industry is stable. In terms of profitability, the company's comprehensive gross margin/net margin for the single quarter of 24Q2 was 18.05%/7.48%, respectively, and +2.77pct/-2.31pct, respectively. The increase in the company's share of POE products led to gross profit growth, and the decline in net interest rates was mainly affected by impairment. At the same time, the company bucked the trend and expanded overseas production capacity. The total production capacity of Thailand and Vietnam is expected to reach about 0.6 billion square meters in 2025. Simultaneously evaluating the US market, the expansion of overseas production capacity is expected to further increase the company's profitability.

The new materials business is progressing steadily, and the downstream demand market is opening up. 24H1 shipped 67.7815 million square meters of photovoltaic backpanels, -18.26%; photosensitive dry film shipped 73.6651 million square meters, +35.83% year-on-year; and shipped 5.606 million square meters of aluminum-plastic film, +35.54% year-on-year. The company has excellent platform-based product development capabilities and outstanding customer channel advantages. The electronic materials business customers already cover well-known customers in industries such as Pengding Holdings, Shanghai Electric Power Co., Ltd., Shennan Circuit, and Jingwang Electronics. As AI accelerates the development trend, the PCB industry has ushered in a new round of growth, and the company's electronic materials business demand continues to expand. At the same time, the company's aluminum-plastic film products have also entered the sales volume stage and have been successfully introduced to some power battery customers such as Ganfeng Electronics and Nandu Power. With the expansion of production capacity and customer expansion, it is expected that the industry ranking will be further enhanced.

Investment suggestions: Increased differentiation, clear production capacity, and pattern reshaping are the main lines of the photovoltaic industry in 2024. As the leader in the photovoltaic film industry, the company has a stable production and sales share, fully adapts the product range to various subsequent technology iterations, accelerates the overseas production capacity layout to meet customer shipping needs, shows comprehensive advantages, continues to lead the industry in profitability, and is optimistic about the company's competitive growth in 24 years and profit elasticity after cycle reversal. The company is expected to achieve operating income of 24.895 billion yuan, 29.717 billion yuan, and 34.186 billion yuan respectively in 2024-2026, and net profit to mother of 2.301 billion yuan, 2.769 billion yuan, and 3.362 billion yuan, with year-on-year increases of 24.4%, 20.3%, and 21.4%. The corresponding EPS is 0.88, 1.06, and 1.29, respectively, and the PE corresponding to the current stock price is 15.8/13.2/10.8 times, respectively, maintaining a “buy” rating.

Risk warning: shortage of raw materials and risk of price fluctuations; new business market expansion falls short of expectations; production capacity expansion falls short of expectations; overseas situation risk and exchange risk, etc.