A pioneer in the application of middle and high-end materials, an excellent supply chain integration solution provider. The company was founded in 2002 and is a pioneer in professional services for chemical and electronic materials applications in China. The company is committed to implementing integrated solutions for “product model integration”. On the one hand, it helps the original factory develop new materials and processes, and on the other hand, it provides customers with full-process technical services to meet customer needs for material quality, speed, price and innovation. With core capabilities such as technical support, industrial chain information processing, and collaborative inventory management, the company has formed a unique competitive advantage in segments such as mobile terminals, home appliances, LED lighting, and solar energy. Currently, it has many leading customer brands in the industry, such as Huawei, Xiaomi, BYD, Foxconn, Longqi, ZTE, Lenovo, Huaxian Optoelectronics, iFLYTEK, GAC, etc.

Demand in the engineering plastics market is stable, and 5G and new displays have brought new opportunities to the electronic materials industry. The company's products include engineering plastics and electronic materials. By market, compared with general plastics, engineering plastics can meet higher requirements in terms of mechanical performance, heat resistance, durability, and corrosion resistance. China's engineering plastics industry is in a stage of steady development. According to data from the Forward-looking Research Institute, China's engineering plastics demand reached 6.27 million tons in 2020, an increase of 370,000 tons over the previous year. In 2021, China's engineering plastics demand reached 6.65 million tons, an increase of 6% over the previous year. In terms of the electronic materials market, the domestic market size exceeds 400 billion, of which semiconductor materials and magnetic materials are the most important markets. With the large-scale spread of 5G, mobile terminals and base stations are generating a large demand for electromagnetic shielding and thermal conductivity products, and the market size of the electromagnetic shielding and thermal conductivity industry is expected to grow exponentially. Furthermore, after years of development, the display materials industry has shown remarkable characteristics such as product diversification, industrial concentration, and rapid iteration, which will accelerate the development of the electronic materials industry.

The industrial chain has remarkable advantages. Joining hands with Germany's leading machine tool manufacturers is pointing to high-end manufacturing. The company has the advantages of industrial chain information processing and flexible supply chain. It mainly meets the material application needs of downstream brand customers and their foundries by providing integrated solutions, and sells materials to customers. In addition, the company issued an announcement to sign a strategic agreement and cooperation. The company cooperated with Huile Joy Machine Tool Company. The two sides gave full play to their respective advantages and resource sharing, jointly cooperated in the fields of new energy, aerospace, medical devices and industrial robots, and formed a deep strategic partnership. Tongyi plans to become Huile Xile Machine Tool's strategic partner in the fields of new energy, aerospace, and medical devices, and the only strategic partner in the field of industrial robotics. In the long run, the company will join hands with Huile Joy to enter the high-end manufacturing market, which will further open up room for growth.

Investment suggestions: We expect the company to achieve revenue of 35.46/43.81/5.206 billion yuan and net profit of 0.34/0.75/92 billion yuan in 2023-2025. The corresponding PE is 115.5/52.0/42.3x, which is the first time that it has been given an “increase in holdings” rating.

Risk warning: risk of market demand falling short of expectations, risk of insufficient supply of raw materials and price increases, risk of changes in the international environment.