Key points of investment

Next Wednesday (December 06), a company listed on the Main Board, “Xing Xin New Materials” asks for a quote.

Xingxin New Materials (001358): The company's main products are organic amine products, including piperazine, amide series, etc.; the company achieved operating income of 374 million yuan/508 million yuan/774 million yuan in 2020-2022, YOY in that order was 20.12%/35.96%/52.46%, with a compound annual growth rate of 35.54%; achieving net profit of 51 million yuan/116 million yuan/209 million yuan, YOY in that order was -14.28%/125.32%/80.81% The compound annual growth rate of net profit for three years was 51.71%. In the latest reporting period, the company's revenue from January to September 2023 was 502 million yuan, down 12.57% from the same period last year; net profit was 129 million yuan, a year-on-year decrease of 26.89%. The company expects to achieve net profit attributable to shareholders of the parent company of 163 million to 183 million yuan in 2023, a change of -21.97% to -12.40% over the same period last year.

Investment highlights: 1. The company is a leading producer in the piperazine derivatives segment and has established a good cost advantage through various measures. The company is an industry-leading producer of piperazine derivatives and accounted for a major share of the global piperazine derivatives market (23.81%) in 2022. The company has strong scientific research capabilities in the field of piperazine derivatives, and has independently developed various nanocomposite catalysts such as nano-copper composite catalysts, which have improved the conversion rate of raw materials and product selectivity. The obtained products have the characteristics of high yield, low waste generation, low energy consumption, and easy separation; it has also developed diverse production processes for most products, and can select the cheapest raw material production and lower cost process routes according to market price fluctuations of raw materials; in addition, the company's production capacity has continuous advantages and circular economy advantages, which can effectively improve the material utilization rate of the piperazine production process, thereby reducing Piperazine production costs. 2. The company's products are now used in photoresist strippers for flat panel displays. The fund-raising project plans to expand production and develop new electronic chemical materials such as electronic packaging adhesives and etchants. Wet electronic chemicals are the segment with the highest requirements for quality and purity in chemical reagent products. According to the company's prospectus, the average annual growth rate of global consumption remains above 8%, making it the fastest-growing field in the chemical industry. Among them, photoresist technology barriers for flat panel displays are high, and it is the largest application field of photoresist, accounting for 27.80% of the total global photoresist share in 2019. The company's products, N-hydroxyethyl piperazine, N, N-dimethylpropionamide, can be used as key components of LCD and OLED panel photoresist strippers, and have the characteristics of excellent removal effects and the ability to minimize corrosion of the lower metal film layer; they have now entered the supply chain system of Korea Dongjin Company, one of the world's major wet electronic chemicals suppliers, and its downstream customers include BOE and other companies. The company's current wet electronic chemicals production capacity is almost full. It plans to expand production and develop new electronic chemical materials through fund-raising projects, including electronic packaging adhesives, etchants, etc. The future may be expected to benefit from the continuous increase in demand for high-purity electronic chemicals and the accelerated penetration of domestic substitution.

Comparison of listed companies in the same industry: According to the similarity of main products and revenue structures, Feikai Materials, Yongtai Technology, Wanrun Co., Ltd., Zhongxin Fluorine, Lianhua Technology, and Guobang Pharmaceutical were selected as comparable listed companies for Xingxin New Materials. Judging from the comparable companies mentioned above, the comparable PE-TTM (arithmetic average/excluding negative values and extreme values) is 23.14X, but considering the large product differences of comparable listed companies and the large valuation differentiation shown as a result, we tend to think that the comparable PE-TTM is limited in comparability; the average revenue scale of the comparable company is 4.919 billion yuan, and the gross margin level is 30.86%; in comparison, the company's revenue scale is less than the average of comparable companies, and the gross margin level is higher than the average of comparable companies.

Risk warning: There is still a possibility that companies that have begun the inquiry process will not be able to go public due to special reasons; company content is mainly based on the content of prospectus and other public information; there is a risk that the selection of listed companies in the same industry is not accurate enough; there may be interpretation deviations in the selection of content data. The specific risks of listed companies are shown in the text.