Due to the downturn in the market economy, the company's performance is under pressure in the short term

In 2022, due to the influence of the market economy environment, the short-term economy put downward pressure. The company's operating income was 1,746 million yuan, down 4.71% from the previous year, and the return profit was 163 million yuan, down 18.72% from the previous year. After deduction, the return profit was 109 million yuan, a decrease of 5.08% over the previous year.

In terms of business, the company's high-purity chemicals achieved operating income of 827 million yuan, an increase of 6.26% over the same period last year. Photoresist achieved revenue of 140 million yuan, down 1.94% from the same period last year. The lithium battery material sector achieved revenue of 532 million, a decrease of 20.08% from the same period last year. The reason for the year-on-year decline was mainly due to product fluctuations caused by the company's lithium battery material product restructuring and fluctuations in raw material prices. NMP, the core product of lithium battery materials, achieved revenue of 484 million yuan.

In terms of expenses, in 2022, the company's sales expenses fell 24.10% year on year, management expenses fell 11.39% year on year, and financial expenses fell 16.74% year on year. At the same time, the company increased R&D investment, and R&D expenses increased 50.33% year on year.

Focus on the semiconductor field, the steady development of high-purity chemicals and photoresists

In terms of high-purity chemicals, all mainstream products in the company's high-purity series have reached the highest purity SEMI G5 grade, and other small-batch high-purity chemicals have generally reached G3 and G4 grades. The company's ultra-clean high-purity hydrogen peroxide technology for large-scale integrated circuits has broken through foreign technology monopolies. The product quality can reach below 10ppt, meet the highest purity grade set by SEMI, successfully filled the domestic gap, and has become the main supplier for leading chip companies. The company's first phase of 30,000 ton semiconductor-grade high-purity sulfuric acid production line products has reached G5 grade, making it one of the largest semiconductor-grade high-purity sulfuric acid bases in China. At present, the product has been supplied to the domestic semiconductor market (12 inches), while the semiconductor-grade high-purity sulfuric acid phase II 60,000 ton project is under active construction and is expected to be completed in 2023.

In terms of photoresists, the company's subsidiary Ruihong Suzhou has hundreds of models of products, including UV broad-spectrum series, g-line series, i-line series, and KrF series. i-line photoresists have been supplied to well-known large-scale semiconductor manufacturers such as SMIC and Hefei Changxin in China, and KrF photoresists have been mass-produced and supplied to the market. At the same time, the company increased research and development related to photoresists. In 2020, the company launched a high-end photoresist R&D project for integrated circuit manufacturing, purchased the ASML1900 Gi lithography machine and supporting equipment in the second half of 2020, purchased the Nikon KrF S207 lithography machine and supporting equipment in the second half of 2021, and has built ArF and KrF lithography laboratories. The company now has a photoresist R&D platform mainly composed of 5 lithography machines. Currently, research and development of high-end ArF photoresists is being carried out in an orderly manner, and some varieties of high-end KrF photoresists have been mass-produced.

The new energy industry is actively developing, and the lithium battery business has broad prospects. According to China's “New Energy Vehicle Industry Development Plan (2021-2035)”, by 2025, China's new energy vehicle sales will account for 20% of total new vehicle sales (that is, penetration rate). By 2035, pure electric vehicles will become the mainstream of newly sold vehicles.

The company's main lithium battery materials products include lithium battery adhesives and electrolytes such as NMP, CMCLI, etc. The company's NMP products are the only products certified by South Korea's Samsung Group SDI company in China. They are supplied to Samsung Huanxin and have reached a strategic partnership with it, ranking first in the overall ranking of Samsung's suppliers for five consecutive years.

Company Sun Company Weinan Metrology plans to build a project with an annual output of 20,000 tons of gamma-butyrolactone, 100,000 tons of electron-grade N-methylpyrrolidone, 20,000 tons of N-methylpyrrolidone recycling and 10,000 tons of conductive paste. After the completion of the project, the company's NMP production capacity increased dramatically, which is expected to have a positive impact on the company's business performance. The project is under active construction.

Profit forecasting

It is predicted that the company's revenue for 2023-2025 will be 2,125, 25.44, 2,981 billion yuan respectively, and the EPS will be 0.32, 0.43, and 0.53 yuan respectively. The current stock price corresponding to PE is 69, 52, and 42 times, respectively. Last year, it was pressured by macro-influenced performance, but it is optimistic that the company's product layout and performance recovery is expected to occur as the industry cycle recovers, and continues to maintain the “buy” rating.

Risk warning

The risk of declining industry sentiment, the risk of product development progress falling short of expectations, the risk of increased competition in the industry, the risk of changes in overseas policies, etc.