Introduction to this report:
Weak industrial carbon dioxide demand in 2022H1 is compounded by the shutdown and maintenance of the Hainan plant. The growth rate of traditional business has slowed, while the electronic specialty gas business is expected to expand rapidly in the second half of the year.
Key points of investment:
Maintain an “increase in holdings” rating. The company achieved revenue of 363 million yuan (+20.74%) and Guimu's net profit of 83 million yuan (+41.69%) in the first half of 2022. The performance was in line with market expectations. Considering the decline in the company's traditional business, the electronic specialty gas business maintained rapid growth, maintaining the 2022-2024 EPS of 0.38/0.59/0.81 yuan, maintaining the holdings increase rating, and maintaining the target price of 20.79 yuan.
The specialty gas business continued to grow rapidly, and the traditional carbon dioxide business declined year over year. By product, the company's 202H1 specialty gas business revenue was 66 million yuan (+697.99%), and the revenue share rose from 2.75% in 2021 to 18.12% in 202H1, and the gross margin was as high as 84.67%. We expect specialty gases to continue to grow rapidly under the influence of scarce gas shortages and price increases; 2022H1 carbon dioxide business revenue was 115 million yuan (-19.35%), and the revenue share fell from 45.31% in 2021 to 31.52% in 202H1, mainly due to The decline in industrial carbon dioxide demand was compounded by the discontinuation of production and maintenance by the Hainan subsidiary. At the same time, transportation costs rose due to the epidemic. The gross margin of 2022H1 carbon dioxide was 46.63%, down 5.77 pct from 2021.
48 million new orders for high-purity xenon have been received, and specialty gas products are expected to pass ASML certification by the end of 2022 as soon as possible. The company signed an order for 48 million high-purity xenon gas on July 27, proving that specialty gas products have been gradually introduced to downstream customers, and that the electronic specialty gas business has grown or exceeded market expectations. At the same time, the Russian-Ukrainian conflict has led to a global shortage of rare gases, which has affected the downstream supply of lithography gas that has already obtained ASML certification. The catalytic company's photolith is expected to pass ASML certification by the end of 2022 as soon as possible.
Food-grade carbon dioxide has ushered in a peak sales season, and hydrogen peroxide production capacity is being released at an accelerated pace. Summer is the traditional peak season for food-grade carbon dioxide sales. The company is accelerating the expansion of food grade to increase gross profit margins. Industrial-grade carbon dioxide is difficult to reverse due to weak downstream demand; at the same time, the company's 300,000 tons of Fujian plus 300,000 tons of hydrogen peroxide project in Jieyang is expected to be put into operation in batches at the end of 2023 to release performance.
Risk warning: 1) The special gas certification process fell short of expectations; 2) downstream demand for special gases fell short of expectations.