The main supplier of electroplating chemicals in China, promoting advanced packaging: Aisen Co., Ltd. was founded in 2010 and listed on the Shanghai Stock Exchange Science and Technology Innovation Board in December 2023. The company started with traditional packaging and electroplating chemicals, gradually replaced foreign material companies as the main domestic supplier in the field of traditional packaging and electroplating chemicals, and expanded into the fields of advanced packaging, wafer manufacturing and display panels, forming two major business segments: electroplating solutions, supporting reagents, photoresists and supporting reagents. The products are widely used in integrated circuits, new electronic components and display panels. The company's product sales model is a direct sales model, which relies on its own core technologies such as formula design, process preparation and application technology to provide customers with overall solutions for key process links. Downstream customers are mainly concentrated in the field of integrated circuit packaging and new electronic component manufacturing, covering domestic integrated circuit sealing and testing leading manufacturers such as Changdian Technology, Tongfu Microelectronics, Huatian Technology, and Riyuexin, as well as internationally renowned electronic component manufacturers such as Guoju Electronics and Huaxinke. The company expects revenue of 350 to 380 million yuan in 2023, up 8.10% to 17.37% year on year; net profit is expected to be 33 to 37 million yuan, up 41.72% to 58.90% year on year. The total sales revenue of 2023H1, electroplating solution, and supporting materials for electroplating accounts for more than 80% of the company's main business revenue, while photoresists and supporting reagents account for nearly 20% of revenue. Among them, electroplating solutions and supporting reagents are still the largest business segment, and contribute more than 70% of gross profit.

Based on traditional packaging, electroplating solutions and supporting reagents extend to advanced packaging: benefiting from advanced packaging, the electroplating solution and auxiliary reagent market is expected to continue to grow. According to forecast data released by TECHCET, the global semiconductor electroplating chemicals market is expected to reach US$992 million in 2023, while the estimated growth rate is US$1,047 million in 2024, with an estimated growth rate of 5.6%. The main growth drivers include the increase in interconnect layers in integrated circuits and the use of RDL and copper bumps in advanced packaging. According to sales volume, in 2021, the overall market share of domestic companies in traditional packaging electroplating solutions and supporting reagents has exceeded 75%, and domestic substitution in this field has basically been achieved. Among them, the company's market share in terms of sales volume is about 35%, and it already ranks second in the domestic market. In the field of advanced packaging, the main suppliers of electroplating liquid products are still mainly foreign-funded companies. For example, DuPont and Lexi's electroplated copper products in the US, and electroplated tinned silver products from Ishihara in Japan all have obvious market size advantages. The company's advanced packaging electroplating products are mainly used to make bumps in the Bumping process, which can achieve electrical connections between chips, wafers, and carrier boards.

At present, the company's copper plating solution for advanced packaging (high-purity copper sulfate) has been mass-produced and supplied to Huatian Technology in batches; the silver electroplating additive has passed Changdian Technology's certification and is yet to be certified by end customers; and the electroplating copper additive is in the R&D and certification stage.

Using photoresist supporting reagents into advanced packaging, self-produced negative photoresists have been supplied in batches: According to data from the China Electronic Materials Industry Association, the total market size of China's integrated circuit g/i line photoresist in 2022 is expected to grow to 1.09 billion yuan. Among them, the g/i line photoresist market for integrated circuit packaging in China is 547 million yuan in 2022, and is expected to grow to 595 million yuan in 2025. In 2022, the domestic market size of g/i line negative photoresist for advanced packaging is about 372 million yuan, and is expected to increase to 480 million yuan in 2025. It is the main photoresist product in the field of advanced packaging. The photoresist market for advanced integrated circuit packaging is mainly occupied by foreign companies such as Japan's JSR, Tokyo Chemical, Fujifilm, and German Merck. In 2021, the localization rate of g/i line photoresists for domestic integrated circuits (including wafer manufacturing and advanced packaging) was about 20%. In terms of advanced packaging lithography, the company used photoresist supporting reagents as an entry point to successfully achieve large-scale supply of products such as adhesion promoters, developers, removers, etching solutions, etc. to downstream packaging manufacturers, while actively developing photoresist research and development. The company's main source of photoresist revenue is in the field of advanced packaging, which is used in Bumping bump production. A small amount of photoresist revenue in other fields mainly comes from display panel and wafer manufacturing. g/i line negative photoresists for advanced packaging have passed the testing certification of Changdian Technology and Huatian Technology in 2022; positive photoresist products for OLED array manufacturing used in two film layers have passed BOE testing and certification and achieved small-batch supply, and products used in full film layers are still being tested and certified by BOE; i-line positive photoresists for wafer manufacturing have also passed Huahong Hongli certification and entered the small-batch supply stage.

Seizing the advantages of customer resources, revenue in the advanced packaging field is growing rapidly: The company's main business revenue mainly comes from the traditional packaging and electronic components sector. It has established and continuously consolidated its position as the main supplier of electroplating solutions and supporting reagents for traditional packaging. At the same time, revenue in the advanced packaging field is growing rapidly. Photoresist supporting reagents for advanced packaging (adhesion promoters, developers, removers, etching solutions, etc.) are also widely used by well-known sealing and testing manufacturers such as Changdian Technology, Tongfu Microelectronics, and Huatian Technology. Furthermore, on the basis of technology accumulation in the packaging field, the company's product development direction is gradually expanding to fields such as display panels and wafer manufacturing. Among them, in the field of electroplating related to wafer manufacturing, we cooperated with Company A to jointly develop products such as copper plating additives for the Damascus copper interconnection process, and obtained a technical license from Company A for the production of high-purity cobalt sulfate electroplating base liquid. At the same time, the company raised funds in Nantong to expand production capacity and enrich product reserves. The fund-raising project “12,000 ton semiconductor special materials project” involved 4,700 tons of electroplating solution and supporting reagent production capacity, 4,100 tons of photoresist supporting reagents, 2,000 tons of photoresist products, 500 tons of PSPI products, and 700 tons of electronic chemicals such as conductive silver paste for electronic components, copper ultra-coarse liquid, and ink. The company has long-term cooperation with the three mainstream sealing and testing manufacturers. High-quality customer resources are an important guarantee for the company's further development and can lay a good market foundation for new products and additional production capacity.

Investment advice: Based on electroplating solutions and supporting reagents in the traditional packaging field, the company has occupied the position of the main supplier of electroplating solutions and supporting reagents for traditional packaging in China, and has gradually developed into other application fields along the industrial chain. It has gradually covered electroplating processes in the fields of passive components, PCBs, advanced packaging, wafer manufacturing, photovoltaics, etc., while entering the lithography process through photoresist and supporting reagent products. Related products will further increase the breadth of coverage of the company's product line, further opening up room for growth, and the scale of revenue is expected to continue to expand. We expect that in 2023-2025, the company's EPS will be 0.41 yuan, 0.63 yuan, and 0.85 yuan, respectively, and PE corresponding to the closing price on January 31 will be 90.2X, 58.7X, and 43.4X respectively. We are optimistic about the potential to increase the market share of the wet electronic chemicals and photoresists used in advanced packaging by domestic manufacturers, covering it for the first time, and giving it a “recommended” rating.

Risk warning: 1) Risk that industry demand falls short of expectations: For example, demand for terminals such as consumer electronics is picking up or the semiconductor industry's recovery falls short of expectations, and demand from downstream customers in the chip industry chain is declining, which will adversely affect the company's business development and profitability. 2) Risk of customer certification and mass production falling short of expectations: If the customer delays the launch schedule, the certification/introduction of the company's new products falls short of expectations, and related products cannot enter the batch supply stage, it will adversely affect the company's future revenue growth. 3) Risk of increased market competition: If the company is unable to continuously update technology and develop products according to market demand and maintain product and technical competitiveness, the company may not be able to effectively compete with domestic and foreign companies, thereby adversely affecting the company's market share, market position, and business performance.