Incident: In the first half of 2024, the company achieved revenue of 1.183 billion yuan, +21.70% YoY; net profit to mother of 55.36 million yuan, +131.19% YoY.

Revenue achieved positive year-on-month growth: The company achieved revenue of 0.641 billion yuan in 2024Q2, +17.22% YoY and +18.09% YoY. Mainly affected by the recovery in consumer electronics demand and the recovery in the panel industry, company orders rebounded, and revenue grew year on month. Among them, in the first half of 2024, the company's TFT series achieved revenue of 1.136 billion yuan, +23.77% year-on-year; the black and white series achieved revenue of 0.038 billion yuan, -20.77% year-on-year.

The month-on-month decline in gross margin was mainly due to increased competition for black and white products: the company's gross margin in 2024Q2 was 14.42%, down 2.85 percentage points from month to month, up 1.12 percentage points from month to month. The decline in gross margin was mainly due to increased competition in the black and white industry. Specifically, the company's gross margins for 2024H1, TFT series, and black and white series were 15.75% and 20.63%, respectively, up 2.96 percentage points and down 14.05 percentage points from the previous year, respectively. Its main business, the TFT series, improved gross margin as capacity utilization increased, and gross profit increased year-on-year. Due to the depreciation of the yen exchange rate, the company's exchange earnings increased, and profits increased accordingly. The company achieved net profit of 24.62 million yuan to mother in a single quarter of 2024Q2, +109.97% YoY and -19.94% YoY.

The large-size production line was put into operation in the second half of the year, and the high-end proportion continued to increase: 2024H1. The installation and commissioning of the company's Hefei Phase II 1720mm production line began one after another. It is expected to be officially put into operation in the second half of the year. The research and development phase of UV adhesive polarizers and hydrophobic polarizers used in large-size TVs has basically been completed, and mass production will be carried out on this production line. In addition, the company's products used in small to medium size LCDs have reached the thinnest effective thickness of 69 μm, and the combined thickness is less than 150 μm; the circular offset for small to medium 3D fixed and flexible AMOLEDs was successfully developed and mass produced in 2024 Q1; polarizer products used in differentiated applications such as semi-reflective eye protection LCDs, AR/VR folding light paths, AR-HUD, and light field screens are also continuing to be iterated or developed.

Investment proposal: We expect the company to achieve operating income of 2.635/3.385/4.079 billion yuan and net profit to mother of 0.119/0.173/0.275 billion yuan in 2024-2026. The corresponding PE was 29.75/20.44/12.90 times, respectively, maintaining the “gain” rating.

Risk warning: Production capacity release falls short of expectations; consumer electronics demand falls short of expectations; new product development falls short of expectations.