Event: On August 27, 2024, the company released its 2024 semi-annual report. 24H1 achieved operating income of 7.587 billion yuan, +118.30% year over year; realized net profit of 0.233 billion yuan, +14.89% year over year; realized deducted non-net profit of 0.35 billion yuan, +154.22% year over year. 24H1 non-recurring profit and loss was -0.117 billion yuan, of which fair value change gain/loss from holding (or disposal) of transactional financial assets and liabilities was about -0.14 billion yuan. It was mainly due to the company's silver futures contracts, silver leasing business, and foreign exchange derivatives affected by fluctuations in silver points and exchange rates, and fair value change profit and loss calculated at the end of the company's investment in SMIC.

24Q2 achieved operating income of 3.942 billion yuan, +104.58% year over month; realized net profit of 0.057 billion yuan, -50.89% year on year, -67.46% month on month; realized deducted non-net profit of 0.156 billion yuan, +169.08% year on year and -19.91% month on month.

TopCon silver paste shipments increased, and it was the first to enjoy LECO slurry mass production dividends. According to Infolink, the market share of N-type cells is about 27% in 2023, and the penetration rate is expected to further increase to nearly 79% in 2014. Benefiting from the accelerated iteration of N-type batteries, the company achieved rapid growth in silver paste shipments with continued leadership in TopCon technology and product performance; at the same time, in 24Q2, LECO technology became the standard technology for mass production of TopCon batteries. As the first batch of suppliers to launch product solutions and promote mass production in the industry, the company was the first to enjoy LECO paste mass production dividends. 2024H1, the company's photovoltaic conductive silver paste achieved sales of 1132.05 tons, an increase of 76.09% over the previous year; among them, sales of a full set of conductive silver paste products used in N-type TopCon batteries achieved sales of 988.03 tons, accounting for a rapid increase of 87.28% of the company's total sales volume of photovoltaic conductive silver paste products, and is in a leading position in the industry. Looking ahead to 24H2, the company's silver paste is expected to maintain good shipments.

Continue to deepen the semiconductor paste layout. In the field of semiconductor electronics, the company's LED/IC chip packaging bonding silver paste products with different thermal conductivity have continued to be iteratively upgraded. Product promotion and sales have gradually transitioned from small customer groups to medium to large customer groups, and the customer structure has been continuously upgraded; for power semiconductor packaging applications, sintered silver and AMB ceramic copper clad plate brazing pastes for chip bonding have entered the marketing stage, continuously enhancing the company's brand influence in the semiconductor electronics industry. The company started investing in the construction of high-performance electronic special materials projects in Dongying, Shandong, including a project with an annual output of 5,000 tons of silver nitrate, a project with an annual output of 2000 tons of metal powder, and a project with an annual output of 200 tons of electronic-grade paste, to continue to strengthen the depth of the industrial layout.

Investment advice: We expect the company's 2024-2026 revenue to be 15.71, 19.254 and 22.785 billion yuan, respectively, with corresponding growth rates of 63.6%, 22.6%, and 18.3% respectively; net profit to mother is 0.563, 0.676, and 0.799 billion yuan respectively, corresponding growth rates are 46.0%, 20.2%, and 18.1%, respectively. Based on the closing price of August 29, the corresponding PE is 9X/7X/6X. The company is a leading domestic PV silver paste company and is expected to benefit from N Type iterative, maintaining a “recommended” rating.

Risk warning: downstream demand falls short of expectations, market competition intensifies, etc.