Event: the company releases three quarterly reports in 2023

Steady growth on the revenue side, 2023Q1-Q3 newly signed orders increased rapidly 2023Q1-Q3 achieved operating income of 2.411 billion yuan, + 34% year-on-year, of which Q3 revenue was 1.066 billion yuan, + 24% year-on-year. We judge that on the one hand, benefiting from the high prosperity of the semiconductor and photovoltaic industries, the main business of the company's process media supply system continues to grow at a high speed; on the other hand, the rapid expansion of Gas Box, electronic gas and other businesses contribute to a good increase in revenue. As of the end of 2023Q3, the company's inventory and contract liabilities were 3.383 billion yuan and 2.188 billion yuan respectively, which were + 90% and + 121% respectively compared with the same period last year.

The company's 2023Q1-Q3 signed 5.079 billion yuan in new contracts, up 78% from the same period last year, accounting for 51% and 36% of the new contracts from the semiconductor and photovoltaic industries, respectively. By the end of 2023Q3, the company's on-hand orders reached 6.053 billion yuan, + 95% compared with the same period last year. As on-hand orders continue to be delivered-revenue recognition, the company's 2023Q4 and 2024 revenue side will continue to grow at a high speed.

The profitability of fee control and cost reduction continued to improve. In the first three quarters, the company deducted the non-net interest rate compared with the same period last year + 1.24pct2023Q1-Q3 achieved a net profit of 271 million yuan, + 97% compared with the same period last year; of which 2023Q3 was 121 million yuan, + 43% compared with the same period last year. The non-parent net profit deducted by 2023Q1-Q3 was 200 million yuan, + 57% compared with the same period last year, of which 2023Q3 was 125 million yuan, + 52% year-on-year. 2023Q1-Q3 sales net interest rate is 12.00%, year-on-year + 4.32pct; deduction of non-sales net interest rate is 8.29%, year-on-year + 1.24%, profit level has been improved. 1) Gross profit margin: the gross profit margin of 2023Q1-Q3 sales is 28.32%, which is slightly higher than that of the same period last year plus 0.70pct. We judge that the main reason is the optimization of product structure and the appearance of scale effect. 2) cost side:

The expense rate during 2023Q1-Q3 is 16.96%, year-on-year-1.14pct, in which sales, management, R & D and financial expense rates are-0.02,-2.45, + 1.20 and + 0.13pct, respectively.

Process media supply system business continues to expand, GasBox, OPEX business growth potential is strong. 1) process media supply system: if only considering the semiconductor industry, we estimate that the market size of Chinese mainland process media supply system in 2023 is about 20.6 billion yuan. In 2022, the company's electronic process equipment income is 1.899 billion yuan. We estimate that the company's local market share is less than 10%, and there is still a lot of room for growth. 2) Gas Box: if only the demand for semiconductor equipment is taken into account, we estimate that the global and Chinese mainland Gas Box market will reach RMB 192 and RMB 6.7 billion respectively in 2023. The company is actively docking semiconductor-photovoltaic equipment customers, is expected to enter the rapid volume stage. 3) OPEX: (1) Electronic gas:

The company is one of the few domestic enterprises that can stabilize the mass production of electronic-grade arsine and phosphane. In 2022, the key distribution of electronic Dazong gas, Hefei, Weifang, Lishui, Tongling and other projects will be gradually put into production from the second half of 2023 to the end of 2024. (2) precursors: the precursor manufacturing base built by the company in Tongling electronic material production base will cover more than 20 kinds of precursor products, involving silicon-based, metal-based, High-K and Low-K four categories, which are currently in the customer introduction stage and are expected to gradually reach mass production in 2024. (3) MRO: the company is one of the few local enterprises with the ability of MRO one-stop service, and the post-market service is expected to expand quickly.

Profit forecast and investment rating:

Taking into account the sufficient existing orders and the large fair value change income in 2023H1, we adjust the company's net profit from 2023 to 2025 to be 4.06,5.65 and 771 million yuan respectively (the original value is 4.34,5.82 and 778 million yuan), and the current market capitalization corresponds to a dynamic PE of 26,19 and 14 times respectively, maintaining the "overweight" rating.

Risk tips: downstream capital expenditure decline, increased market competition, new business development is not as expected.