CMP polishing pads are leading in China, strategically arranging polishing liquids and display materials. Maintaining the “buy” rating, the company is the leading domestic CMP polishing pad company, accelerating the expansion of production capacity and actively promoting domestic replacement. At the same time, the company strategically lays out CMP polishing solutions and semiconductor display materials (PSPI, YPI, TFE-INK, etc.), and its diversified business layout opens up room for long-term growth. 2024 is expected to be the first year of large-scale expansion of new businesses, and the company's performance is expected to usher in rapid growth. We maintain the company's profit forecast. We expect the company to achieve net profit of 235 million yuan, 442 million yuan, and EPS of 0.25, 0.47, and 0.66 yuan in 2023-2025. The current stock price corresponds to PE of 80.4, 42.9, and 30.4 times, maintaining a “buy” rating.

Global demand for semiconductor materials is expected to pick up. The company's multi-category layout accelerates the recovery of domestic investment to replace global fab equipment combined with downstream inventory removal, and demand for semiconductor materials is expected to rise. The company's layout in the semiconductor materials field mainly includes CMP polishing pads, CMP polishing solutions, semiconductor photoresists, and advanced packaging materials, which are expected to fully benefit from the recovery in demand and domestic substitution. Specifically, in terms of CMP polishing pads, the company is the only domestic supplier in China that has fully mastered the core R&D and manufacturing technology of the entire polishing pad process. In terms of CMP polishing liquid, the company is one of the few domestic enterprises with the ability to supply polishing particles themselves. Currently, downstream customers have successfully verified and are about to release the quantity quickly. In terms of semiconductor photoresists, the autonomous work on upstream core raw materials has basically been completed, and production capacity of 300 tons of KrF/ArF photoresists is expected to be completed and put into operation in 2024Q4. In terms of advanced packaging materials, they are mainly PSPI and temporary bonding adhesives, which are currently in the customer sample delivery stage.

There is a broad space for semiconductor display materials. YPI, PSPI, TFE-INK, etc. are building the company's new growth poles. The company's semiconductor display materials mainly include YPI, PSPI, TFE-INK, etc. Due to high technical barriers, the localization rate is still low, and the company is expected to accelerate the domestic substitution process after the breakthrough. Specifically, in terms of YPI, the company is the only domestic enterprise with a kiloton-grade, ultra-clean, automated YPI production line. It is the only YPI supplier in China to achieve mass production and shipment. It continues to receive G6 line orders from various domestic core customers throughout the year, and its market share continues to increase. On the PSPI side, it is the only domestic enterprise that has passed the downstream panel customer certification, broken the absolute monopoly of foreign friends and merchants for more than ten years, and achieved batch delivery in Q3 2022. On the TFE-INK side, the company received the first purchase order from a leading domestic downstream display panel customer in 2023Q4, and large-scale deployment is imminent.

Risk warning: downstream demand falls short of expectations, new product release falls short of expectations, customer verification falls short of expectations.