In an economic environment and industry supply chain fraught with uncertainties, Dong Yang Guang (600673.SH) has shone brightly with its performance in the first half of 2024.

Following a positive growth in the first quarter, Dong Yang Guang has maintained an upward momentum.

Revenues have increased to 6.013 billion yuan, and net profits have returned to profitability.

This achievement far exceeded market expectations, demonstrating robust resilience and growth potential.

In its financial report, the company mentioned that it has experienced the complexity of the global economic environment, the intensification of geopolitical conflicts, and challenges to the stability of global industry and supply chains.

However, through the implementation of a series of effective strategies, it has successfully improved production and operational efficiency, thereby maintaining stable development during difficult times.

From this report card, it appears that Dong Yang Guang has successfully navigated through the trough and ushered in a new phase of development.

The significant increase in performance in the first half of the year not only dispelled market doubts about the company's growth potential but also indicated a broad development prospect for the company in the future.

Dong Yang Guang, a leading domestic manufacturer of electrode foil, has a core business spanning four major areas: electronic components, high-end aluminum foil, new chemical materials, and energy materials.

It is the world's largest enterprise with technological innovation across the entire industry chain from electronic light foil to electrode foil and aluminum electrolytic capacitors.

In the first half of this year, Dong Yang Guang's revenue was 6.013 billion yuan, a year-on-year increase of 16.15%, and net profit reached 226 million yuan, achieving a positive transformation from loss to profit compared to last year.

However, for a long time, Dong Yang Guang has faced severe challenges in the market environment.

The continuous weakness in the consumer electronics market and the destocking pressure in the lithium battery industry have led to a sharp decline in market demand, impacting the demand for electronic components and high-end aluminum foil products, and subsequently affecting the sales of core products such as electrode foil, capacitors, and electronic light foil.

In fact, this profitability challenge is not unique to Dong Yang Guang but is a common challenge faced by the entire industry.

Many companies involved in electrode foil, capacitors, battery aluminum foil, and lithium battery-grade PVDF businesses, including Haixing Shares (603115.SH), Jianghai Shares (002484.SZ), Ding Sheng New Materials (603876.SH), and Juhua Shares (600160.SH), have also encountered negative net profit growth for several consecutive quarters.

Therefore, after the release of the 2024 semi-annual report, the continuous recovery of Dong Yang Guang's profitability has become a focus of attention for the market and investors.

This positive change has benefited from the company's precise cost control strategy.

In the first half of the year, Dong Yang Guang has achieved significant results in cost control, with sales expenses and administrative expenses reduced by 8% and 42%, respectively.

Although financial expenses have slightly increased due to a decrease in interest income, the company's overall cost structure has been optimized.

At the same time, Dong Yang Guang also values investment in the future, with R&D expenditure increasing by 23.88% year-on-year, laying a solid foundation for long-term development.

These measures have not only improved Dong Yang Guang's profitability indicators, such as the gross margin and net margin, which have increased to 13.96% and 3.6% respectively, up by 2.88 and 7.02 percentage points year-on-year, but also optimized the company's operational capabilities.

Key indicators such as total asset turnover, inventory turnover, and accounts receivable turnover are all better than the same period last year.

Dong Yang Guang has demonstrated the value of "growing in adversity" with practical actions.

Diversification brings about a leap in efficiency.

As an industry leader, Dong Yang Guang's performance improvement is not only attributed to cost reduction and efficiency enhancement strategies but also more fundamentally to the company's insight and grasp of industry dynamics.

By implementing diversified operations and deep integration of the industry chain, Dong Yang Guang has transformed from traditional aluminum foil processing to high-value-added emerging industries.

On the basis of consolidating its core competitiveness, Dong Yang Guang has also expanded into high-end fields such as electronic components and high-end aluminum foil, especially achieving significant breakthroughs in the core technology of formation foil, building a complete industry chain from electronic light foil to aluminum electrolytic capacitors, paving the way for seizing future market opportunities.

This series of transformations is timely, as the prosperity of the domestic electronic information manufacturing industry has brought rare development opportunities for Dong Yang Guang's related businesses.

In the first half of 2024, the added value of China's large-scale electronic information manufacturing industry increased by 13.3% year-on-year, with growth rates 7.3 percentage points higher than the same period's industry and 4.6 percentage points higher than high-tech manufacturing.

Benefiting from this, Dong Yang Guang's production, exports, benefits, and investment have all achieved rapid growth.

In particular, the formation foil project at the Inner Mongolia Ulanqab base, with its gradually released capacity and policy preferences, has further enhanced the company's profitability.

The project is currently in a stable operation phase, and the laminated foil project, as the first phase of the newly built project in Inner Mongolia Ulanqab, has been successfully put into production and entered the mass production phase.

It is expected that after the project is fully operational, it will achieve an annual production capacity of 20 million square meters.

In addition, some production lines of the aluminum electrolytic capacitor and supercapacitor production base construction project in Zhejiang Dongyang have been put into operation, and the production capacity is in a rapid ramp-up phase, indicating that the base is about to fully release its production capacity.

In terms of industry chain extension, because a large amount of chlor-alkali chemical products are needed in the corrosion formation process of electrode foil, Dong Yang Guang has gradually built a circular economy industry chain from chlor-alkali chemical industry to fluorine fine chemical industry.

This layout not only enhances the company's control over product quality, production processes, and costs but also promotes the overall optimization of the industry chain through upstream and downstream linkage.

In the field of fluorine fine chemicals, Dong Yang Guang has laid out front-edge products such as the fourth-generation refrigerants and fluorinated cooling liquids.

By cooperating with top domestic universities and research institutes, the company has accelerated the research and development and commercialization process of new products.

Currently, perfluoropolyether has been equipped with pilot technology, and hexafluoropropylene oligomers have entered the commercial promotion stage, providing efficient liquid cooling solutions for multiple fields such as AI, data centers, and energy storage.

It is worth mentioning that to deepen the layout of the chemical industry chain, Dong Yang Guang's subsidiary has also participated in the bankruptcy reorganization of Jiangxi Lan Hengda Chemical Co., Ltd.

In the future, it will provide strong raw material support and market expansion space for the development of the company's chlorofluoro industry chain by integrating its salt mine resources and new energy industry advantages.

In addition to the above business, Dong Yang Guang has also made significant progress in the field of energy materials.

During the reporting period, the company's strategic cooperation with the Zunyi municipal government and GAC Group has also made significant progress, successfully winning the exploration rights of the aluminum polymetallic mine in Tongzi County, Guizhou Province, and is gradually carrying out exploration work, opening up a new path for the expansion of the company's new energy business.

Overall, under the guidance of a diversified strategy, all business segments of Dong Yang Guang have shown a vigorous development trend.

The synergistic effects and complementary advantages between the various business segments are becoming increasingly significant, promoting each other and helping the company to achieve stable growth in adversity.

However, the uncertainty of the external environment still exists, and whether Dong Yang Guang can continue to cross the economic cycle and create more substantial value for shareholders will still be an important test for its future development.