Shanghai Hiuv New Materials Co., Ltd (688680.SH) has been continuously increasing its cash reserves, making the "safety cushion" thicker. The "second growth curve" is becoming clearer day by day.

In the context of overcapacity and intense homogenized competition, the solar industry has shown a "chill," which has become a consensus within the industry. According to industry data, the mainstream price of solar modules, the end product of the photovoltaic industry chain, has decreased from 1.8 yuan/watt-1.85 yuan/watt in early 2023 to 0.9 yuan/watt-0.95 yuan/watt by the end of the year, further dropping to 0.75 yuan/watt in the first half of 2024. The drastic fluctuation in prices has led to losses in the entire industry chain, from silicon materials to silicon wafers to cells, with almost no company able to escape the downward pressure on the industry. In this development context, "breaking the deadlock" and "seeking new growth" have become a common topic for all solar companies to explore. On June 21, Shanghai Hiuv New Materials Co.,Ltd (688680.SH) provided its answer to "seeking new growth" with the launch of a new product. On that day, at the "Creating a New Era of Intelligence and Insulation" event hosted by Fuyao Group, Shanghai Hiuv New Materials Co.,Ltd, in collaboration with Fuyao Group, introduced a new intelligent dimming panoramic sunroof for cars. The official launch of this product signifies the market commercialization of Shanghai Hiuv New Materials Co.,Ltd's PDCLC (polymer dispersed liquid crystal) dimming film, Light Feel. According to Mr. Yu Hang, Vice President of Shanghai Hiuv New Materials Co.,Ltd, "With the launch of this new generation intelligent dimming panoramic car sunroof, combining the insulation and temperature control effects of the dimming film with the release of interior space and reduction of vehicle weight of the sunroof glass, we not only create a differentiated car interior experience but also further achieve energy saving and emission reduction goals, which is highly promising in the market." Could this be a new growth opportunity for Shanghai Hiuv New Materials Co.,Ltd? Since entering a fluctuation cycle in the photovoltaic industry, Shanghai Hiuv New Materials Co.,Ltd's performance and stock price have inevitably been impacted - in 2023, the company recorded a net loss for the first time, with a significant decline in the stock price... Now, with the growth momentum brought by the commercialization of new products, can it help the company to achieve a growth in net profit once again? Market commercialization of new products clarifies the second growth curve As a high-tech enterprise specialized in the research and manufacturing of new thin film materials, Shanghai Hiuv New Materials Co.,Ltd focuses on the research, production, and sales of CECEP Solar Energy photovoltaic module encapsulation materials, providing important support to the global CECEP Solar Energy photovoltaic industry. After nearly twenty years of development, with superior product and technology capabilities, Shanghai Hiuv New Materials Co.,Ltd has become a leading technology enterprise in the field of photovoltaic module encapsulation materials, with products including transparent EVA films, white efficiency-enhancing EVA films, POE films, and various other products. Although as one of the main suppliers in the field of photovoltaic module encapsulation materials, Shanghai Hiuv New Materials Co.,Ltd is not without its "troubles." In 2023, due to the drastic fluctuations in raw material prices and the devaluation losses brought about by large-scale raw material inventory, Shanghai Hiuv New Materials Co.,Ltd incurred a net loss for the first time. During the period, the company achieved operating income of 4.872 billion yuan, a decrease of 8.20% year-on-year; the net profit attributable to shareholders was -0.229 billion yuan, turning from profit to loss. From an industry perspective, with the majority of companies in the photovoltaic film industry experiencing significant declines in performance and even losses, it seems reasonable for Shanghai Hiuv New Materials Co.,Ltd to also incur losses. Specifically, starting from Q4 of 2023, the competitive situation in the photovoltaic industry chain has significantly intensified, putting pressure on profitability at each stage. In Q1 of 2024, all 22 companies in the main industry chain experienced a decline in performance. The revenue growth rate in Q1 of 2024: modules > wafers > silicon materials > cells. The net profit growth rate in Q1 of 2024: silicon materials > modules > cells > wafers. (Information source: Dongxing) Fortunately, as one of the top three companies in the industry, the company has gradually opened up more incremental space through continuous research and innovation capabilities. The PDCLC dimming film Light Feel introduced by Shanghai Hiuv New Materials Co.,Ltd is a good example of this. It is understood that through multidimensional exploration of product performance, Shanghai Hiuv New Materials Co.,Ltd's PDCLC dimming film Light Feel, when applied on car sunroofs, has several advantages that may help the company consolidate its technological barriers and open up new incremental space. First, it provides strong privacy protection. The new generation intelligent dimming panoramic car sunroof, with the help of Shanghai Hiuv New Materials Co.,Ltd's PDCLC dimming film Light Feel, can achieve light control and privacy protection functions. Second, it provides excellent sun protection. According to Mr. Yu Hang, Vice President of Shanghai Hiuv New Materials Co.,Ltd, the solution of "panoramic sunroof + dimming film" can also help improve heat insulation, with the new generation intelligent dimming panoramic car sunroof having a cooling effect in accordance with the 2.5H standard under direct sunlight compared to regular sunroofs.The skylight glass will cool by 7.6C, with better heat insulation efficiency, ushering in a new era of sunshade and heat insulation.According to Shanghai Hiuv New Materials Co., Ltd, this product can also provide highly customized services, supporting personalized design customization and zone dimming. Users can choose different styles, colors, and dimming methods according to their preferences and needs to create their own unique driving space. In recent years, with the continuous advancement of technology, the use of panoramic sunroofs in cars has become an industry consensus. According to statistics from Gaise Automotive, the penetration rate of panoramic sunroofs in China's top 20 car models in 2022 has reached around 38%. It is predicted that the penetration rate of panoramic sunroofs in China may exceed 25% by 2025, with the penetration rate of new energy vehicles expected to exceed 70%. With the increasing penetration rate, the market size of panoramic sunroofs has significantly expanded. According to research by DIResaerch, the global market scale of panoramic sunroofs is steadily expanding, reaching 41.96 billion yuan by 2024, and is expected to reach 91.94 billion yuan by 2030, with a compound annual growth rate of 13.97%. Against this backdrop of development, the PDCLC (Polymer Dispersed Liquid Crystal) dimming film Light Feel introduced by Shanghai Hiuv New Materials Co., Ltd will further anchor the development dividend of panoramic sunroofs, helping the company open up new market incremental space and enter the "second growth curve". Improving quality and efficiency, the cash "safety cushion" continues to grow thicker. Affected by the company's first loss performance, Shanghai Hiuv New Materials Co., Ltd has inevitably faced market concerns about the company's cash flow situation. But is this concern justified? On the one hand, from the company's gross profit margin performance, the fluctuation of the company's main business gross margin is relatively consistent with the industry average. According to previous announcements by Shanghai Hiuv New Materials Co., Ltd, from 2021 to 2023, the fluctuation of the gross margin of the company's main business is mainly due to the fluctuation of the gross margin of the solar film, which is the main product of the company. The decrease in the gross margin of the company is not significantly different from comparable companies in the same industry, with the gross margin of the company being close to the average gross margin of listed companies in the same industry. On the other hand, from the actual cash flow performance of the company, the cash "safety cushion" of Shanghai Hiuv New Materials Co., Ltd is still very solid. According to financial data, in 2023, the total amount of current assets of Shanghai Hiuv New Materials Co., Ltd was 3.763 billion yuan, with a final cash and cash equivalent balance of 0.357 billion yuan. The net cash flow generated from operating activities was -2.81 billion yuan. According to a previous Shanghai Hiuv New Materials Co., Ltd investor Q&A, the company's payment collection model is "3+6" (3 months of accounts receivable followed by 6 months of promissory notes). These notes can be discounted, but in order to avoid high financial costs, Shanghai Hiuv New Materials Co., Ltd only discounts them when it needs to pay cash expenses such as raw material costs, salaries, and electricity bills. Therefore, combining the discountable notes and cash funds, the company's actual cash flow is sufficient to meet operational needs and does not pose a liquidity risk. Furthermore, due to the industry practice of using promissory notes as the main form of payment and strict adherence to accounting policies, only a few banks' discounted notes can be included in operating cash flow, while most discounts are classified as financing cash flow, resulting in the company's negative operating cash flow. However, if the discounted notes included in financing cash flow are restored to operating cash flow, the net operating cash flow after restoration in 2023 is 4.81 billion yuan, with the net operating cash flow in the first quarter of 2024 being 1.86 billion yuan. Of course, Shanghai Hiuv New Materials Co., Ltd's solid cash "safety cushion" is also related to the company's active measures to "improve quality and efficiency". During the reporting period, in order to improve operational efficiency, reduce financial costs, and control fund risks, Shanghai Hiuv New Materials Co., Ltd has further strengthened the scientific and efficient management of inventory, accounts receivable, promissory notes, and funds. Specifically, the company has set up a professional purchasing department to analyze raw material procurement data in a timely manner and formulate reasonable procurement strategies, optimize procurement prices, and improve turnover efficiency. By actively managing inventory, the company analyzes inventory turnover data regularly and holds special meetings to reduce obsolete inventory and increase inventory turnover. In addition, the company also uses smart management of various financial indicators to enhance benefits from operational efficiency, reduce costs and expenses, and further improve the company's profit level. In summary, through improving quality and efficiency to increase the thickness of the cash "safety cushion" and introducing new products to open up the second growth curve, Shanghai Hiuv New Materials Co., Ltd has sufficient strength and momentum to ensure the company's stable and sustainable development.