Key points of investment:
The company issued the “Notice on the Action Plan for Double Improvement of Quality and Return”: The company formulates an action plan for “improving quality and return”. Specific measures include: 1) focusing on the development of the main business and comprehensively building an international level electronic materials enterprise consortium; 2) adhering to independent research and development and mastering core technology; 3) focusing on shareholder returns and sharing enterprise development results; 4) consolidating corporate governance to achieve high-quality development; 5) focusing on the quality of information disclosure to effectively convey the company's value.
The high-purity chemicals sector continues to expand, and high-end photoresist products are progressing steadily. The company's business mainly focuses on the two directions of pan-semiconductor materials and new energy materials. The leading products include high-purity chemicals, photoresists, lithium battery materials, industrial chemicals and energy. 1) In terms of high-purity chemicals, semiconductor-grade high-purity hydrogen peroxide, high-purity sulfuric acid, and high-purity ammonia have all reached the highest purity SEMI G5 grade. Other small-batch high-purity chemicals have generally reached G3 and G4 grades, and customers cover mainstream 12-inch domestic fabs. According to the company's 2023 performance forecast, although the company's performance was affected by various factors, shipments of high-purity chemicals continued to increase, with shipments of high-purity hydrogen peroxide increasing by nearly 40% year-on-year. In terms of production capacity, the company has built one of the largest domestic production capacities for high-purity electronic chemicals, high-purity sulfuric acid and high-purity hydrogen peroxide. 2) In terms of photoresists, Ruihong Suzhou has a complete range of photoresists, and has hundreds of models of products such as UV broad-spectrum series, G-line series, i-line series, and KrF series. Currently, i-line photoresist products are being supplied on a large scale to well-known domestic semiconductor companies such as SMIC, Hefei Changxin, and Huahong Semiconductor; some varieties of KrF high-end photoresist have been mass-produced; and R&D and innovation of ArF high-end photoresist products is continuing to advance. In November 2023, the company announced that Ruihong Suzhou plans to introduce strategic investors to raise 850 million yuan in capital through a fixed increase for R&D, procurement, production and sales of advanced process semiconductor photoresists and supporting reagent businesses and related investments to help the business develop better and faster.
Adhere to independent research and development, increase investment in R&D, and attach great importance to shareholders' returns and contributions to development results. Adhering to the concept of independent research and development, the company continues to increase investment in R&D. According to the company's 2023 quarterly report, from January to September 2023, the company spent 52 million yuan on R&D, accounting for 5.45% of revenue. It has a total of 125 international/domestic patents, including 60 invention patents and 65 utility model patents. The company attaches great importance to investor returns. Since its listing, the total amount of cash dividends (including cash repurchases) has exceeded 190 million yuan. In addition to cash dividends, the company has also shared the company's development results by transferring capital reserves to increase share capital.
Investment analysis opinion: According to the company's 2023 performance forecast, net profit due to mother was achieved during the reporting period of 0.12-0.18 billion yuan, a year-on-year decrease of 89%-93%, and net profit after deducting non-return to mother of 0.39-50 billion yuan, a year-on-year decline of 54%-64%. The main reasons are:
1) Prices of NMP and industrial chemicals, which are the main products of lithium battery materials have declined sharply; 2) Preparation for impairment of assets showing signs of impairment is about 35 million yuan (estimated provision for impairment of goodwill of some subsidiaries is about 10 million yuan; estimated impairment provision for inventory, accounts receivable, etc. is about 25 million yuan); 3) Holds Morimatsu International Holdings Co., Ltd. (stock abbreviation:
Morimatsu International, stock code: 02155) Changes in the fair value of stocks had an impact of -34 million, etc. Under the influence of various factors, the company's performance declined sharply year over year. At the same time, due to the long interval between previous reports, we re-forecast the company's 2023-2025 net profit of 0.16, 0.97, and 119 million yuan (the original value in 2023-2024 was 3.07 and 429 million yuan), and the current market value corresponds to PE of 494, 81, and 66X. Considering that the company's high-purity chemicals and photoresist business still maintains good development, shipments will continue to increase in 2023, and we are optimistic about future progress. According to Wind's unanimous expectations, comparable companies such as Aisen Co., Ltd., Nanda Optoelectronics, Huahai Chengke, and Shanghai Xinyang maintained an average PE rating of 86X for the time being.
Risk warning: 1) downstream demand falls short of expectations; 2) capacity release falls short of expectations; 3) raw material prices fluctuate greatly.