2023Q3's performance was under pressure, but profitability rebounded, maintaining the “buy” rating 2023Q1-Q3 to achieve revenue of 959 million yuan, -28.30% year-on-year; net profit of 0.2 billion yuan, -79.43%; net profit after deduction of 50 million yuan, -40.97%; gross profit margin of 23.79%, +3.04pcts year-on-year.

2023Q3 achieved revenue of 331 million yuan in a single quarter, -16.19%, -0.55% month-on-month; net profit of 0.12 million yuan, -55.40%, +262.63%; net profit after deducting non-return net profit of 018 million yuan, +268.58%, -14.23% month-on-month; gross profit margin 24.45%, +8.02pcts year-on-month, +1.99pcts month-on-month. Considering the weakness of the terminal market, we have lowered our profit forecast. The estimated net profit for 2023-2025 is 0.40/1.67/195 million yuan (previous value was 1.74/2.60/303 million yuan), corresponding to EPS 0.04/0.17/0.20 yuan (previous value was 0.18/0.26/0.30), and the current stock price corresponding to PE is 284.3/68.2/58.4 times. Considering that the company will continue to release high-end products such as photoresists and wet electronic chemicals in the future, the company has sufficient growth momentum and maintains a “buy” rating.

Vigorously developing high-purity chemicals and photoresists to build a semiconductor material platform. Looking at the division of the company's business, in terms of high-purity chemicals, in addition to leading products such as ultra-pure hydrogen peroxide, ultrapure ammonia, and ultrapure sulfuric acid, which have reached G5, other small-batch high-purity chemicals have generally reached G3 and G4 levels, successfully entering the supply chains of leading domestic chip and panel display manufacturers. In terms of photoresists, the company has hundreds of models of products such as UV broad-spectrum series, g-ray series, i-line series, and KrF series. Among them, i-line photoresists have been supplied to well-known large-scale semiconductor manufacturers such as SMIC and Hefei Changxin in China, and KrF photoresist has been mass-produced and supplied to the market.

At the same time, the company is actively developing high-end ArF photoresist, purchased the Nikon KrF S207 lithography machine and supporting equipment in the second half of 2021, and has built ArF and KrF lithography laboratories. In the future, as the company continues to release high-end wet electronic chemicals and photoresists, the company's performance is expected to grow steadily.

Continuously increasing R&D investment, and the company's focus on R&D in the first three quarters of 2023 was 52 million yuan, +20.54% over the same period last year, and the R&D cost rate reached 5.45%. Continuous R&D helps the company enrich the product matrix and accelerate the pace of customer verification, consolidate the company's dominant position in the fields of high-end wet electronic chemicals and photoresists, and seize more market share.

Risk warning: downstream demand falls short of expectations; capacity release falls short of expectations; technology development falls short of expectations; customer acquisition falls short of expectations.