Incident: The company released its 2024 semi-annual report. In the first half of 2024, the company achieved operating income of 0.296 billion yuan, +38.46% year on year; continued loss reduction. Net loss due to mother decreased to 0.006 billion yuan in the first half of the year, net loss after deducting net loss from mother to 0.02 billion yuan; gross profit margin 39.70%, +12.01 pct year on year; net profit margin of 0.86%, year on year +11.16 pct year on year.

Electronic chemicals are being replaced at an accelerated pace, and the growth rate is impressive: in the first half of 2024, the company's electronic chemicals revenue was 0.145 billion yuan, more than 40% over the same period. It was deeply tied to major domestic and foreign high-end PCB manufacturers such as Shenghong Technology, Jiantao Group, Oshcon, and Shanghai Electric Power Co., Ltd., to gradually replace foreign electronic chemicals. Currently, the company has more than 130 pulse copper plating production lines, more than 59 copper production lines, and more than 16 nickel gold production lines. The finished products are mainly used in high-end AI servers, traditional servers, 3C electronics or automobiles.

The composite copper foil market is rapidly expanding, and the benefits of composite copper foil equipment are immediate: composite copper foil can effectively prevent battery heat loss and improve safety; at the same time, the copper cost of 6.5 micron composite copper foil is 11% lower than that of 6 micron traditional copper foil; increases circulation stability; reduces weight by nearly 60%, and increases energy density by 5-10%. As global sales of lithium batteries increase and the penetration rate of composite copper foil continues to expand, the industrialization of composite copper foil continues to advance, and upstream equipment is expected to benefit first.

Composite copper foil equipment has excellent parameters and has been gradually delivered: in the first half of 2024, rising copper prices accelerated the industrialization of composite fluid collectors. The company's one-step equipment reached a line speed of 12-15 m/min, and the yield was as high as 95%; the two-step equipment increased the width to 1,650 mm, achieving an annual production capacity of 1 GWh per unit, helping to reduce the cost of composite copper foil.

At present, the company has signed more than 50 units/set of intended orders, and has shipped 4 sets of composite copper foil production equipment.

Investment advice: The PCB business is growing rapidly, and the number of intended orders for composite copper foil has increased, and the company is expected to turn a loss into a profit in the second half of the year. Based on this, we expect the company to achieve operating income of 0.715/1.248/1.596 billion yuan and net profit to mother of 0.054/0.128/0.218 billion yuan in 2024-2026, corresponding PE of 50.05/21.02/12.32 times, maintaining the “gain” rating.

Risk warning: risk of price fluctuations of major raw materials; risk of falling short of expectations in the composite copper foil market and developing new business markets; macro-environmental risk; risk of lifting the ban on restricted stocks.