First(SH:603806) Zhongyuan Securities·2024-08-29 08:11Investment Rating - The report assigns a "Buy" investment rating for the company, marking its first coverage [2][3]. Core Insights - The company is a global leader in photovoltaic (PV) encapsulant films, expected to sustain growth through market cycles. It has maintained a market share exceeding 50% for several years [2][3]. - The demand for PV encapsulant films is anticipated to grow steadily in the medium to long term, supported by a stable competitive landscape characterized by a few strong players [2][3]. - The company has a significant competitive advantage in the PV encapsulant film sector, with strong technical, scale, and cost advantages, allowing it to achieve profitability even during industry downturns [3][10]. Summary by Sections 1. Company Overview - Established in 2003, the company is the largest supplier of PV encapsulant films globally, offering a range of products including transparent EVA films, white EVA films, and POE films. It serves major clients such as JinkoSolar and Trina Solar, achieving over 50% market share in PV encapsulant films [8][10]. 2. Market Demand and Competitive Landscape - PV encapsulant films are critical materials for PV modules, with demand influenced by downstream PV installations and technological advancements. The market is expected to see a shift towards POE and EPE films due to increasing adoption of bifacial modules and N-type cells [21][22]. - The competitive landscape is stable, with significant differences in scale and profitability among companies. The company has successfully differentiated itself from smaller competitors through superior product performance and a comprehensive service system [3][10]. 3. Business Segments and Growth Potential - The company's PV encapsulant and backsheet businesses are well-positioned, with ongoing development in electronic materials and other new materials. The introduction of products like photosensitive dry films and aluminum-plastic films is expected to drive future growth [2][10]. - The company has a robust pipeline for new materials, including a focus on domestic production capabilities for key raw materials, which is expected to enhance its competitive position [10][24]. 4. Financial Projections and Valuation - The company reported a total revenue of 22.59 billion yuan in 2023, with a year-on-year growth of 19.66%. Net profit for the same period was 1.85 billion yuan, reflecting a growth of 17.21% [4][10]. - Future earnings per share (EPS) projections are 0.80 yuan for 2024, 1.08 yuan for 2025, and 1.33 yuan for 2026, with corresponding price-to-earnings (PE) ratios of 18.32, 13.64, and 11.05 respectively [4][10].