Event: On the evening of August 28, the company released its 2022 semi-annual report. In the first half of 2022, the company achieved revenue of 847 million yuan, an increase of 91.31% over the previous year; realized net profit of 144 million yuan, an increase of 68.85% over the previous year; achieved net profit of 116 million yuan after deduction, an increase of 76.17% over the previous year. In 2022Q2, the company achieved revenue of 436 million yuan in a single quarter, up 88.25% year on year and 6.09% month on month; realized net profit of 63.73 million yuan, a year-on-year increase of 48.48%, and a year-on-year decline of 21.00%.

The amount of special gas released was obvious, which led to a sharp rise in 22H1's performance. Benefiting from the rapid development of the company's semiconductor materials business, especially the significant increase in production and sales volume of specialty gas products, the company's 22H1 performance increased significantly year-on-year. 22H1's specialty gas business achieved revenue of 669 million yuan, a sharp increase of 114.26% over the previous year, and a year-on-year increase of 1.32 pct in gross margin. The sharp increase in the company's specialty gas business revenue was mainly due to the company's Ulanqab subsidiary's additional overall production capacity of nitrogen trifluoride. At 22H1, the company achieved sales volume of 4744 tons of specialty gas products, a sharp increase of 104.07% over the previous year, and the average product price increased by about 4.99% over the previous year. In terms of MO source business, 22H1's MO source business achieved revenue of 106 million yuan, an increase of 17.18% year on year, and gross margin was basically the same year on year. 22H1 achieved sales volume of MO source products of about 23.6 tons, a slight year-on-year decrease of 1.73%, and an average product price increase of about 19.2% year-on-year. In addition, the company's advanced precursor materials business is seizing opportunities to accelerate domestic substitution. 22H1 sales revenue increased by about 90% year-on-year, becoming the company's new performance growth point.

The fund-raising project lays out precursors and special gas production capacity, and the introduction of semiconductor materials continues to advance. The company plans to issue convertible bonds to unspecified targets to raise no more than 900 million yuan in capital, of which about 650 million yuan will be used respectively for industrialization projects of precursor products for advanced semiconductor processes with an annual output of 45 tons, high-purity phosphane, arsenic expansion and arsenic technical improvement projects with an annual output of 140 tons, and an annual output of 7,200 tons of electronic-grade hydrogen trioxide by Ulanqab Nanda Microelectronic Materials Co., Ltd. On July 20, the application for the issuance of convertible bonds was approved by the Shenzhen Stock Exchange. In the first half of 2022, the company's low-silicon low-oxytrimethylaluminum products for third-generation semiconductors passed verification by major domestic manufacturers and achieved small-batch sales. In terms of precursor business, the company has 4 silicon precursor products that have been verified by international advanced process companies. In terms of the photoresist business, the lithography workshop and production line with an annual output of 25 tons required for the company's ArF photoresist project have been built, the ASML immersion lithography machine has been put into use, and product verification work is progressing steadily for many major downstream customers.

Profit forecast, valuation and rating: In the first half of 2022, the company's special gas products were released significantly, which led to a sharp year-on-year increase in the company's overall performance, slightly exceeding previous expectations. Considering the accelerating pace of the company's overall product release, we raised the company's profit forecast for 2022-2024. We expect the company's net profit to be 2.68 billion yuan (increase of 32.0%) /3.63 (increase of 41.2%) /4.73 billion yuan (increase of 47.4%) for 2022-2024, respectively. We are optimistic that in the context of the boom in the semiconductor industry, the long-term development of the company's main businesses, such as semiconductor precursors, electronic specialties, and semiconductor photoresists, still maintains the company's “increase in holdings” rating.

Risk warning: R&D risk, product introduction risk, capacity construction falling short of expectations, downstream demand falling short of expectations.