The company's business operations are developing well, with positive growth in revenue and net profit in the first three quarters. In the first three quarters of 2023, the company achieved operating income of 3,542 billion yuan, a year-on-year increase of 11.84%; realized net profit of 481 million yuan, an increase of 3.73% over the previous year; realized net profit of 485 million yuan after deducting non-return to the mother, an increase of 8.52% over the previous year; and a gross sales margin of 31.86%. In the single quarter of 2023, Q3 achieved operating income of 1,219 billion yuan, a year-on-year increase of 10.01%, a decrease of 2.59% over the previous year; realized net profit of 139 million yuan, a decrease of 23.46% over the previous year, a decrease of 17.35% over the previous year; realized net profit after deduction of 136 million yuan, a decrease of 25.65% over the previous year, a decrease of 30.59% over the previous year, and achieved a gross sales margin of 30.70%. As of the first half of 2023, the company's precursor materials have entered the leading echelon of the industry and occupied a leading position in the domestic market; the company's photoresist business is developing strongly, and product sales and market share are constantly increasing; the company's electronic specialty gas business is running smoothly, and performance is rising steadily; thanks to the continuous development of downstream shipyard business, the company's insulation board sales orders have increased accordingly, and the board business is developing well.

The company's electronic materials business has a rich product range and strong development momentum. The company's electronic materials business has a wide range of products, mainly including semiconductor precursor materials, photoresists and supporting reagents, electronic specialty gases, silicon powder, and semiconductor material delivery systems (LDS). The company further laid out precursor materials supporting advanced processes in chip manufacturing, and launched new High-K materials and ultra-high/low temperature silicon products. Some products have already entered client testing. Relying on the advantages of the company's rich variety of precursor material products, the company continues to expand new customers based on its original customers, and the products are introduced smoothly. Customers in the photoresist business include major domestic panel manufacturers such as BOE, Huaxing Optoelectronics, and Huike. The company's self-developed products such as low-temperature RGB photoresist for OLEDs, RGB photoresist for CMOS sensors, and L-line photoresist for advanced packaging RDL layers are being tested on the client as planned, and the process is going smoothly.

The company's new production capacity for electronic materials and LNG insulation panels has been put into operation one after another. The next-generation large-scale integrated circuit packaging special materials localization project and the next-generation electronic information materials localization project - photoresist and photoresist supporting reagents are expected to reach the intended state of use in August and December 2023, respectively. The construction of the company's second board plant has basically been completed, and production will be put into production one after another. The company completed the construction of an intelligent production line for GTT's new technology NO96 super+, and successfully produced qualified products for customers to use. According to the company announcement “Record of Investor Relations Activities on June 9, 2023”, it is expected that the delivery of the Beijing gas project will be basically completed this year.

Profit forecasts and investment ratings. We estimate that the company's net profit for 2023-2025 is 652 million yuan, 824 million yuan and 1,024 million yuan, corresponding to EPS of 1.37 yuan, 1.73 yuan and 2.15 yuan, respectively. Referring to the valuations of comparable companies in the same industry, the reasonable valuation is 35-40 times PE in 2024, and the corresponding reasonable value range is 60.55-69.20 yuan, maintaining superior market ratings.

Risk warning: The commissioning of production expansion projects falls short of expectations; downstream demand falls short of expected risks.