Items:

The company released three quarterly reports in 2023, 23Q3 realized revenue of 319 million yuan, yoy-2.75%; realized net profit of 27 million yuan, yoy+569.66%; deducted non-net profit of 18 million yuan, and yoy-55.57%; realized sales gross profit of 35.28%. The revenue in the first three quarters of 2023 was 871 million yuan, the net profit of yoy-0.77%; was 114 million yuan, and the non-net profit of yoy+716.15%; was 71 million yuan, yoy-23.92%.

Peace viewpoint:

The revenue of semiconductor materials maintained positive growth, while the paint business showed negative growth due to the weak demand of the construction industry.

The company achieved an operating income of 871 million yuan from January to September in 2023, which is basically the same as that of the same period last year. The revenue of 23Q1-Q3 semiconductor business reached 545 million yuan, an increase of 10.46% over the same period last year; the revenue of paint business reached 325 million yuan, down 15.21% from the same period last year. Due to the depressed construction industry and falling prices of raw materials, the price of paint products dropped sharply, resulting in a 26% drop in revenue from the business.

The increase in R & D costs is mainly due to the continuous increase in investment in projects such as photoresist. The R & D cost of 23Q1-Q3 was 105 million yuan, an increase of 28.97% over the same period last year, accounting for 12.03% of revenue (9.25% for the same period in 22 years). The company's photoresist project continues to push forward: line I and KrF photoresist products have been continuously sold, ArF dry photoresist is in the customer certification stage, and the research and development of ArF immersion photoresist is progressing smoothly; in terms of production capacity, the total planning of Shanghai headquarters is 513t / year, with more than 200t / year under construction, Hefei Phase I 500t / year, Shanghai Chemical Industrial Zone planning and construction 500t / year.

Newly participate in industrial investment funds and seize investment opportunities in the upper and lower reaches of the storage industry chain. On August 8, 2023, the company plans to participate in the long-term industrial fund managed by Hubei National Core as a fund manager with its own funds. The fund raised 2.043 billion yuan, and the company invested 100 million yuan. The investment field focuses on high-quality equity investment projects in the upper and lower reaches of the semiconductor storage industry chain.

The company's business will focus on semiconductor electronic chemicals with more competitive advantages and technical barriers. The existing Shanghai headquarters base electronic chemicals production capacity of 19,000 tons / year, Hefei second production base Phase I 17,000t / year production capacity is expected to put into production of 24H2; the newly planned Shanghai Chemical Industrial Zone is proposed to build 30,000 tons / year of electronic chemicals and 500t / year photoresist, is expected to be completed by the end of 2025 and put into production by the end of June 2026.

Investment suggestion: the company's business will further focus on more value-added semiconductor materials, the new electronic chemical project will be put into production soon, and the capacity of functional wet electronic chemicals and photoresist and supporting reagents will be released and the output will increase gradually. superimposed downstream semiconductors, display panel industry fundamentals gradually improved, increased localization rate may bring domestic electronic chemicals demand upward, the company's performance will achieve growth. Maintain the previous forecast (the report forecast on September 5, 2023). It is estimated that the operating income from 2023 to 2025 will be 13.45,18.49 and 2.486 billion yuan, and the return net profit will be 1.57,2.05 and 288 million yuan, corresponding to the PE of 69.7,53.3,37.8 times on October 24, 2023. Combined with the company's performance growth and terminal fundamentals are expected to repair expectations, maintain the "recommended" rating unchanged.

Risk tips: 1. The growth rate of terminal demand is not as fast as expected. If the fundamentals of the terminal industry such as semiconductors are not repaired as expected and the demand is difficult to pick up, the growth rate of the company's electronic chemicals business may be limited. 2. The risk of intensified market competition and sharp decline in product prices. If comparable companies achieve technological breakthroughs and significantly increase the scale of production capacity, it may cause the risk of overcapacity of some products and intensified market competition, which in turn leads to a decline in the prices of related products and a substantial reduction of gross profit. 3. The risk of large fluctuations in raw material prices. If the basic chemical raw materials are affected by extreme weather, overseas geopolitics and other factors, the start-up of manufacturers is blocked, and the fundamentals of supply and demand and inventory structure change greatly, then the price of raw materials may fluctuate greatly, resulting in a substantial increase in the company's production costs.