Core views:

The company released its 2023 mid-year report, and Q2 performance showed a good development trend. In the first half of 2023, the company achieved revenue of 340 million yuan, -25.30% year-on-year, and net profit of 78 million yuan, or -16.45% year-on-year. Looking at a single quarter, 23Q2 achieved revenue of 178 million yuan, -16.32% year on year, +10.52% month on month; net profit for the single quarter was 50 million yuan, -6.93% year on year, and +78.77% month on month.

Production and sales were in line with expectations, and the decline in raw material prices increased gross profit. According to the business data announcement, 2023H1's main functional wet electronic chemicals production and sales volume were 38,000 tons and 36,600 tons respectively, with a year-on-year ratio of -16.09% and -13.83%; the sales price was 8.86 yuan/kg, or -13.65%.

The company's gross margin in 2023Q2 was 38.21%, an increase of about 6.00 pct over the previous month, mainly benefiting from a drop in raw material prices. According to Baichuang Yingfu data, the average price of dimethyl carbonate in 23Q2 was about 4669.27 yuan/ton, down 2.34% from the previous month, and the company's profit rebounded markedly.

Continue to consolidate the market foundation and continuously optimize the product structure. Peeling liquid products for photoresist have been imported, tested and verified at several leading domestic brand factories, and successfully obtained orders from Yungu (Gu'an) Technology Co., Ltd. and Tianma Microelectronics Technology Co., Ltd.; semiconductor developer and diluent have been steadily supplied in Chengdu Yicheng Integrated Circuit Co., Ltd. (formerly Chengdu Yiswei System Integrated Circuit Co., Ltd.), and further expanded the market for downstream semiconductor clients at home and abroad.

Production capacity under construction is gradually put into operation to promote product upgrading. The 16,000-ton ultra-high purity TMAH developer project was officially put into operation at the end of April 2023. The production equipment is running stably and the product quality is controllable. The Sichuan Gelinda 100kt/a electronic materials project (phase I) has completed engineering construction and equipment installation and commissioning. In the future, the company will arrange trial production work in stages according to the product production process and production process.

Profit forecasts and investment recommendations. The company's EPS is expected to be 1.02/1.46 yuan/share in 23-24, respectively. Referring to the valuation of comparable companies, the PE valuation is 30 times the 23 year performance, corresponding to a reasonable value of 30.66 yuan/share, and a “buy” rating.

Risk warning. Fundraising projects fall short of expectations; increase in raw material prices; risk of customer concentration.