Endogenous and epitaxial, creating platform-based material suppliers. Jacques Chemical, the predecessor of Jacques Technology, was founded in October 1997 and specializes in flame retardants. In 2013, Jiangsu Yake invested in a liquefied natural gas (LNG) insulation board integration project. Through independent investment, it broke foreign monopolies and became a domestic enterprise providing key material support for large LNG carriers. Since 2016, through a series of epitaxial mergers and acquisitions, the company has gradually expanded businesses such as semiconductor precursors, electronic special gases, silicon powder, and new display materials TFT photoresist and color photoresist. Currently, it has successfully developed into a strategic emerging materials platform company with electronic materials as the core, LNG insulation panels as the supplement, and flame retardant business.

Process node upgrades and 3D storage stacking trends drive increased demand for precursors. Thanks to the increase in logical production capacity below 7nm, the increase in the number of 3D NAND stacking layers, and the development of DRAM manufacturing to EUV lithography, superimposed computing power has driven rapid growth in demand for HBM, and the size of the precursor market continues to grow. According to TECHCET statistics, the global ALD/CVD precursor market grew 21% year over year to US$1.39 billion in 2021, and is expected to grow 12% to nearly US$1.56 billion in 2022. As the entire industry's demand for new materials for ALD/CVD processes continues to grow, TECHCET expects a compound growth rate of 7% for metal precursors over the next 5 years, a CAGR of 5% for High K precursors, and 8% CAGR for dielectric material precursors.

The panel industry is moving eastward and upgrading, and the opportunities for domestic materials are vast. The global LCD industry continues to shift to mainland China. According to DSCC, mainland China's panel production capacity share reached 67% in 2022, and mainland China's panel production capacity share is expected to increase to 70% by 2025. Due to considerations such as supply chain safety, cost reduction, and localized services, mainland panel manufacturers are strongly willing to replace domestic production, and the market that domestic panel photoresist manufacturers can reach will continue to open up as panel production capacity shifts to mainland China. As a core supplier to panel manufacturers such as LG Display, BOE, and Huaxing Optoelectronics, it is expected to fully benefit from the localization demand for panel materials.

Electronic specialty gases are widely used, and demand for silicon powder, the core material for EMC packaging, is steadily increasing. As an indispensable key material in the processing and manufacturing process of the electronics industry, such as integrated circuits, display panels, photovoltaic energy, etc., the market space is vast. Komet, a subsidiary of Jacques, which engages in electronic specialty gases, is the largest manufacturer of sulfur hexafluoride in China. The company's carbon tetrafluoride has entered TSMC's supply chain. As of 2022, the company's design production capacity for sulfur hexafluoride and carbon tetrafluoride has reached 12,000 tons/year and 2000 tons/year respectively, and steady growth in production capacity supports long-term business growth. Silicon powder is the core raw material for EMC plastics. According to the “2022-2027 China Silicon Powder Industry In-depth Market Research and Development Prospect Forecast Report” published by China Powder Network quoting the New Thinking Industry Research Center, China's silicon powder market in 2021 was 2.46 billion yuan, and is expected to grow to 5.5 billion yuan in 2025. Jacques Technology is gradually replacing domestic production in the fields of electronic special gases, silicon powder, etc., and revenue is expected to grow steadily.

LNG imports are growing at an accelerated pace, and orders for composite panels are plentiful. In the context of “carbon neutrality,” global LNG trade volume and China's LNG import volume are growing at an accelerated pace, and orders for LNG carriers are plentiful. LNG composite sheets are the core material for transport ships, and the competitive pattern is excellent. As a core supplier to local shipbuilders such as the Hudong Shipyard and Jiangnan Shipyard, there is plenty of room for order growth. We expect Jacques Technology to achieve revenue of 48.0/67.6/90.1 billion yuan and net profit of 7.2/10.8/1.53 billion yuan respectively in 2023-2025, corresponding to PE 39.8/26.5/18.7x, giving it a “highly recommended” rating.

Risk warning: Downstream demand falls short of expectations, progress in new product development and customer introduction falls short of expectations, and increased risk of international trade friction.