The company continues to develop and introduce new categories of special gas, and its market share continues to rise. with the development of the semiconductor industry and the trend of domestic substitution of materials, the company's business is expected to continue to grow. Considering that the downstream is in the stage of destocking and waiting for the demand to recover gradually, we lower the company's annual net profit forecast for 2023-24-25 to 212 million / 306 million / 429 million yuan (the original forecast is 231 million / 369 million / 519 million yuan), corresponding to the EPS forecast of 1.76 inch 2.54 hectare 3.57 yuan. With reference to the current comparable company valuation (selecting special gas companies such as Zhongchuante Gas, Jacques Technology, Camette Gas and Jinhong Gas, and referring to the consensus expectation of Choice, the average PE in 2023 will be 44 times PE, corresponding to the target price of 77 yuan, maintaining the "buy" rating.

Revenue in the first three quarters of 2023 was-19.51% compared with the same period last year, and its net profit was-34.63% compared with the same period last year. In the first three quarters of 2023, the company achieved revenue of 1.129 billion yuan, year-on-year-19.51%, net profit of 122 million yuan, year-on-year-34.63%, and non-return net profit of 113 million yuan,-37.19%. The company's gross profit margin in the first three quarters of 2023 was 30.21%, up 2.42% from the same period last year. Pcts;Q3 single-quarter gross profit margin was 32.10%, up 3.85 pcts from the previous year. Among them, the company Q3 achieved revenue of 389 million yuan in a single quarter, year-on-year-25.14%, month-on-month + 1.83%; realized return-to-mother net profit of 47 million yuan, year-on-year-30.77%, month-on-month + 35.84%; realized non-return net profit of 44 million yuan, year-on-year-34.05%, month-on-month + 48.06%. The decline in revenue and return net profit in the first three quarters of 2023 is mainly due to the large increase in volume and price due to the tight supply of rare gas in the same period in 2022, and the volume and price of Q1-3 rare gas returned to the normal level in 2023.

In the first three quarters of 2023, the rate of four fees increased by 5.50 pcts over the same period last year, and the net cash flow generated by operating activities was 102 million yuan. In terms of expense rate, the company's sales / management / R & D / financial expense rate for the first three quarters of 2023 was 6.25%, 6.30%, 3.18%, 1.58%, respectively, compared with the same period last year. The total four-fee rate was 17.32%, up 5.50 pcts from 11.82% in the same period last year. The company's Q3 single-quarter sales / management / R & D / financial expense rate is 6.26%, 6.09%, 3.26%, 1.81%, respectively, with a month-on-month change of + 0.23, 0.06, 0.04, and 0.10 pct, respectively. From the perspective of cash flow, the net cash flow generated by the company's operating activities in the first three quarters of 2023 was 102 million yuan,-36.82% of the same period last year.

The construction of the project will expand the production and expand the products to help the company's long-term development. On October 27, 2023, the company announced that it planned to sign the "Project Investment Agreement of Walter Semiconductor Materials R & D headquarters" with the people's Government of Triangle Town, Zhongshan City, Guangdong Province, with a total investment of 800 million yuan. The project starts within 6 months from the date of land delivery, is completed within 18 months after construction, and is put into production within 6 months after completion. It belongs to the construction project of semiconductor gas R & D and production center. At present, the production capacity of Foshan headquarters tends to be saturated. The implementation of the project will help to relieve part of the production pressure of Foshan headquarters, at the same time lay a solid foundation for the company's future development in Guangdong, and help to make full use of resources and enhance the company's future operating capacity. To promote the long-term development of the company. In addition, in the first half of 2023, the company's IPO investment projects "Gas Center Construction and Storage Management Project", "Electronic Gas production and purification and Industrial Gas filling Project" and "Intelligent Operation Project" have all reached the intended state of use. The construction project of semiconductor materials with an annual output of 1764 tons is progressing smoothly. After reaching production, it will increase the annual production capacity of 1764 tons of special gases such as high-purity carbon monoxide and high-purity nitric oxide, among which electronic-grade hydrogen bromide, high-purity hexafluoropropane and electronic-grade boron trichloride are new products. The company actively carries out project construction to expand production capacity, enrich product structure, and increase momentum for the company's long-term development.

The company has a large number of research projects, and the customer verification import is smooth. During the first half of 2023, 16 projects were checked and accepted, 11 items were added, mainly including ion etching gas and doping gas, etc., and 48 projects were being studied by the company at the end of the period. The company has realized import substitution including more than 50 kinds of products, and the quantity is in the leading position among the domestic special gas companies. According to the investor relations activity record table released by the company on October 27, 2023, the company's germanium products passed the certification of the 5nm process production line of the largest memory company in South Korea at the end of last year, and an order has been generated; the ethylsilane project has completed the production line installation, and the test product has been certified by some downstream customers in the pilot stage. The introduction of the company's product verification is smooth, and is expected to gradually contribute to revenue.

Risk factors: shrinking downstream demand; customer introduction progress is not as expected; product prices fluctuate sharply; product development progress is not as expected; capacity construction progress is not as expected; industry competition is becoming increasingly fierce.

Profit forecast, valuation and rating: the company continues to develop and introduce new categories of special gas, and its market share continues to rise. with the development of the semiconductor industry and the trend of domestic substitution of materials, the company's business is expected to continue to grow. Considering that the downstream is in the stage of destocking and waiting for the demand to recover gradually, we reduce the company's annual net profit forecast for 2023-24-25 to 212 million / 306 million / 429 million yuan (the original forecast is 231 million / 369 million / 519 million yuan), corresponding to the EPS forecast of 1.76 inch 2.54 hectare 3.57 yuan. With reference to the current comparable company valuation (select special gas company Zhongchuante Gas, Jacques Technology, Camitte Gas, Jinhong Gas, with reference to the Choice consensus expectation, its average PE in 2023 is 44 times), give the company 44 times PE in 2023, corresponding to the target price of 77 yuan, and maintain the "buy" rating.