The company released the mid-year report of 2022, achieving operating income of 1.645 billion yuan, an increase of 36.75% over the same period last year, and a net profit of 253 million yuan, an increase of 50.57% over the same period last year. Pharmaceutical intermediates, UV curing materials business to achieve high performance growth, maintain the holding rating.
Support the main points of rating
The performance is in line with expectations. According to the company's mid-2022 report, the operating income in the first half of 2022 was 1.645 billion yuan, an increase of 36.75 percent over the same period last year; the net profit belonging to shareholders of listed companies was 253 million yuan, up 50.57 percent from the same period last year; and the net profit excluding non-recurring profits and losses was 273 million yuan, an increase of 81.5 percent over the same period last year. Of this total, the operating income in the second quarter was 779 million yuan, an increase of 21.81 percent over the same period last year, and the net profit was 114 million yuan, an increase of 14.46 percent over the same period last year. The net profit after deducting non-return was 125 million yuan, an increase of 40.87 percent over the same period last year.
Downstream consumer electronics demand was weak, screen display and semiconductor materials business grew slightly: demand was weak in the first half of 2022 due to the epidemic in Shanghai and high inflation in Europe and the United States, and the downstream panel industry began to reduce production since the second quarter. The company's screen display materials sector achieved sales revenue of 700 million yuan in the first half, an increase of 15.24% over the same period last year, and a gross profit margin of 40.11%, down 3.21% compared with the same period last year. Semiconductor materials are affected by the inventory backlog of the original factory, and shipments are expected to be revised down. According to the latest forecast released by Gartner, global semiconductor revenue is expected to grow 7.4 per cent in 2022, down from 13.6 per cent in the first quarter of 2022. The company's semiconductor materials sector achieved sales revenue of 292 million yuan in the first half of the year, an increase of 14.32% over the same period last year, and a gross profit margin of 38.29%, down 0.1% from the same period last year. In addition, according to the company's interactive easy reply in the Shenzhen Stock Exchange, the company's self-developed KrF lithography supporting Barc material has completed a 12-inch line customer import verification work, and has formed a small amount of sales. It is expected that the business of screen display and semiconductor materials will continue to grow driven by the volume of subsequent new products.
The business income of pharmaceutical intermediates has increased significantly, and the market demand for UV curing materials is strong. The company's pharmaceutical intermediate sector achieved sales revenue of 316 million yuan in the first half of the year, an increase of 218.59% over the same period last year. According to the company's interactive easy reply on the Shenzhen Stock Exchange, the company's pharmaceutical intermediate products mainly include bromoacetonitrile, tert-butyl bromoacetate, cyclohexylbenzene, chlorocyclohexane, etc., as well as upstream raw material pharmaceutical factories that supply Pfizer Inc, Huahai, Haizheng and other pharmaceutical companies. According to the company's semi-annual report, the company has another production capacity of 2230t/a halogenated hydrocarbon medical intermediates under construction. With the orderly promotion of the planned production capacity, the company is expected to benefit from the growth of customer demand downstream of pharmaceutical intermediates and the increase in production of pharmaceutical intermediates, and the profitability will remain high. On the other hand, UV curing materials benefited from the increase in optical fiber and cable production and the volume of new products plastic coating materials in automotive, functional film and other business areas, the company's UV curing materials plate achieved sales revenue of 324 million yuan in the first half of the year, an increase of 34.90% over the same period last year. It is expected that the completion of the 10000t/a UV curing optical fiber coating material expansion project will further enhance the company's UV curing material sales and thickening performance.
Valuation
Due to the weakening demand of screen display materials and semiconductor materials, the profit forecast has been lowered. It is estimated that the EPS of the company from 2022 to 2024 will be 0.94,1.04,1.19 yuan respectively, and the corresponding PE of the current stock price will be 22.5,20.3,17.7 times. Be optimistic about the follow-up business growth of pharmaceutical intermediates and UV-curable materials, and maintain the overweight rating.
Main risks faced by rating
The intensification of competition in the industry led to a decline in gross profit margin, a higher order cut for LCD panels and a lower than expected localization rate of upstream materials.