The volume and price of shielding film business fell, and Fangbang shares' net profit in 2021 fell by about 70% year-on-year

On February 16, Fangbang Co., Ltd. released its 2021 annual report, achieving operating income of 286 million yuan, a year-on-year decrease of 0.76%, basically the same as the same period in 2020; and achieving net profit attributable to shareholders of 37.8331 million yuan, a year-on-year decrease of 68.27%.

Among them, the sales revenue of electromagnetic shielding film was RMB 237,284,553.55 and the sales revenue of copper foil was RMB 41,996,452.23. The revenue of electromagnetic shielding film decreased by about RMB 45 million, mainly due to the slowdown in terminal sales growth of smart phone products, and the sales volume and price of shielding film business decreased year-on-year.

Fangbang shares attributed the sharp decline in net profit attributable to the parent company to five reasons:

(1) The copper foil business is still in the ramp-up phase in terms of capacity utilization and yield. During the reporting period, the copper foil business was in a loss-making state, resulting in a decline in the company's overall gross profit margin;

(2) Due to the implementation of the equity incentive plan, the company incurred share-based payment expenses of approximately RMB17.98 million in 2021, an increase of approximately RMB10.05 million from 2020;

(3) During the reporting period, the Company continued to increase its R&D investment in product areas such as electromagnetic shielding films, flexible copper clad laminates, ultra-thin copper foils and resistor films, resulting in a year-on-year increase in the Company's R&D expenses;

(4) During the reporting period, the Zhuhai subsidiary was put into operation, resulting in an increase in depreciation expenses of plant and equipment. At the same time, the corresponding staffing led to an increase in employee salary expenses. Combined with the increase in intermediary consulting service fees and plant rental fees, management expenses increased year-on-year;

(5) During the reporting period, the Company's available cash balance decreased, resulting in a year-on-year decrease in investment income of approximately RMB17.85 million.

In addition, the increase in operating costs was mainly due to the increase in costs of the copper foil business. Since the capacity utilization rate and yield rate of the copper foil business are still in the climbing stage, the gross profit of the copper foil business was in a loss state during the reporting period, resulting in an increase in the company's overall operating costs compared with the previous year.

In 2021, its comprehensive gross profit margin was 51.23%, a decrease of 15.17 percentage points from 2020. This was mainly because the company's newly added copper foil business's capacity utilization and yield rates were still in the climbing stage, and the gross profit of the copper foil business was in a loss state, resulting in a decline in the company's overall gross profit margin.

In terms of the progress of new projects, the Zhuhai copper foil project has been successfully put into production, with sales revenue of 41.9965 million yuan for lithium battery copper foil and standard electronic copper foil, and customer testing and certification work for products such as ultra-thin copper foil with carrier and standard electronic copper foil has been carried out in an orderly manner; the Guangzhou fundraising project has completed civil engineering and exterior decoration, and is currently carrying out interior decoration and installation and commissioning of major equipment. This project has not yet generated sales revenue. Fangbang Co., Ltd. will further strengthen the management and overall planning of new projects, and actively promote the progress of project production line installation and commissioning as well as the progress of testing and certification of various new products.

It is understood that Fangbang shares' main products are circuit boards and upstream key materials in industries such as new energy vehicles. After years of development, the company's electromagnetic shielding films have been used in terminal products of many well-known brands such as Samsung, Huawei, OPPO, VIVO, Xiaomi, etc., and have accumulated well-known domestic and foreign FPC customer resources such as Pengding, MFLEX, Qisheng, BH CO., LTD, Young Poong Group, Hongxin Electronics, Jingwang Electronics, Sandeguan, and Shangda Electronics. The customer targets of new products such as flexible copper clad laminates and ultra-thin copper foils have a high degree of overlap with existing customers, which is conducive to the development of new product markets.