Main points of investment:

The company released the 2021 annual report, the performance slightly exceeded expectations: annual revenue of 2.627 billion yuan (YoY+41%), net profit of 386 million yuan (YoY+68%), deduction of non-return net profit of 321 million yuan (YoY+76%). Among them, Q4 has a revenue of 740 million yuan (YoY+42%,QoQ+8%) in a single quarter, a net profit of 115 million yuan (YoY+92%, QoQ+13%) and a net profit of 88 million yuan (YoY+70%,QoQ+7%). The performance fell in the upper range of the performance forecast, slightly exceeding expectations. The company's annual comprehensive gross profit margin was 39.92%, which increased 0.44pct compared with the same period last year, and the expense rate during the period was 22.81%, which decreased 3.52pct compared with the same period last year. The R & D expenditure rate remained at 7.34%, while the rest of the expense rate decreased. The non-recurrent profit and loss mainly comes from the investment income of 77.2 million yuan.

The company issued a forecast for the first quarter of 2022, which exceeded expectations: the company expects the net profit of returning to the mother in the first quarter of 2022 to be between 1.23 and 143 million yuan, an increase of 80 percent over the same period last year, with a median of 133 million yuan (YoY+96%, QoQ+16%). The net profit after deducting non-return is between 1.28 yuan and 148 million yuan, an increase of 107 percent over the same period last year, with a median of 138 million yuan (YoY+123%, QoQ+57%). The substantial increase in performance was mainly due to the continued growth of the company's display, semiconductor materials and light-cured coatings, as well as the explosive growth of some of the company's pharmaceutical intermediates due to downstream customer demand, resulting in a significant increase in related revenue. The performance exceeded expectations.

Liquid crystal materials continue to grow rapidly, TFT photoresist volume and negative Q4 scale sales show that the plate continues to grow at a high speed: thanks to the continuous improvement of the localization rate and the continuous increase in domestic panel production capacity, the company's sales of liquid crystal and positive photoresist products grow rapidly, driving the company's annual revenue of screen materials to 1.3 billion yuan (YoY+42%) and gross profit margin of 42.35%, reducing 0.91pct over the same period last year. It is expected that it is mainly due to the impact of changes in product structure. Hecheng, a subsidiary of LCD related business, has annual revenue of 1.149 billion yuan (YoY+36%) and net profit of 315 million yuan (YoY+52%). The company's convertible bond investment project will add 120 tons of liquid crystal production capacity per year, which will ensure the growth of the company's liquid crystal sales demand. According to the annual report, 41% of the project progress is expected to be put into production this year. At the same time, supporting the construction of 150 tons / year liquid crystal monomer and strengthening the upstream integration construction will further improve the company's single crystal self-sufficiency rate. The company shows that the material business is actively creating a new growth point, 5000 tons / year photoresist project continues to release, and the annual revenue is expected to exceed 100 million. At the same time, the company's negative photoresist officially began to sell on a large scale from 21Q4, which is expected to bring new growth points. In addition, the company also actively layout the field of OLED materials, Anqing annual output of 15 tons of OLED terminal display material sublimation purification project according to the annual report project progress of 45%.

With the rapid expansion of semiconductor materials, the demand for UV-curable coatings recovers and recovers the growth momentum: the company is one of the important suppliers in the field of semiconductor packaging materials in China. mainly to provide customers with wet process chemicals (developer, etching solution, electroplating solution, stripping solution, etc.) and epoxy plastic sealing materials, tin balls, etc. In 2021, the company's revenue from semiconductor materials reached 552 million yuan, an increase of 35 percent over the same period last year, with a gross profit margin of 38.42 percent, a decrease of 0.39pct over the same period last year. With the rapid growth of the domestic semiconductor market and the acceleration of import substitution, the company's semiconductor material business is expected to continue to develop rapidly. The company's UV-curable coatings resumed growth with the commercial launch of 5G, while increasing growth in new industries such as automobiles, functional films, etc., with annual revenue of 499 million yuan, an increase of 25% over the same period last year, and a gross profit margin of 29.31%, a decrease in 2.11pct over the same period last year. It is expected that the outbreak of demand for pharmaceutical intermediates is mainly affected by the price of raw materials to provide important new growth momentum: the company's pharmaceutical intermediates are mainly used in downstream antiviral drugs, antibiotics and cardio-cerebrovascular medicine. In 2021, the revenue of the company's other products (mainly pharmaceutical intermediates) reached 276 million yuan, an increase of 94% over the same period last year. In the first half of the year, the company's sector was only 99 million yuan, and in the second half of the year, 177 million yuan, a sharp increase of 79% compared with the previous year. From the first quarter results forecast, the company's demand for pharmaceutical intermediates is still explosive growth, pharmaceutical intermediates business is expected to form an important new growth momentum of the company.

Investment analysis opinion: temporarily maintain the forecast of the company's 2022-2023 return net profit of 5.13 and 657 million, and increase the 2024 return net profit forecast of 809 million yuan, corresponding to the PE of 27X, 22X, 17X respectively, maintaining the "overweight" rating.

Risk tips: new product market development is lower than expected; product prices fall sharply; downstream demand is lower than expected