Core views
The company is currently the leading domestic electronic bulk gas supplier and the largest domestic supplier of helium. With the development of integrated circuits and panels, the size of the electronic bulk gas market is growing steadily. With mature management experience and advanced technology, the company broke through the domestic panel and integrated circuit markets in 2018 and 2021, respectively, and became the first in the country. Currently, orders are full. At the same time, the company also has plans for electronic gas. With the implementation of electronic bulk gas on-site gas generation projects and electronic specialty gas, the company is expected to grow rapidly.
occurrences
The company released its 2023 annual report
In 2023, the company achieved revenue of 1,835 billion yuan, an increase of 19.20% over the previous year; net profit to mother was 320 million yuan, an increase of 35.73% over the previous year. Revenue for Q1, Q2, Q3, and Q4 was 4.14, 4.82, 4.60, and 480 million yuan, respectively, and net profit attributable to mother was 7476, 8383, 6828, and 92.72 million yuan, respectively.
Brief review
New projects have been launched one after another, and on-site gas production revenue has increased
In 2023, we will actively promote the continuous construction and commercialization of electronic bulk gas stations in key projects such as the Hefei Comprehensive Insurance Zone, Huaxing Optoelectronics T9, Hefei Changxin Phase II, Beijing Changxin Electric Collection, and Shanghai Dingtai Jiangxin, etc., leading to performance growth. In terms of the helium business, as helium production bases in Guangzhou and Wuhan were completed and put into operation one after another, the company developed more helium resources, developed high-quality domestic and foreign helium terminal customers, and established an increasingly perfect global supply chain system through investment and construction, strengthened operations, and expanded terminals. Market supply capacity was steadily improving, and helium sales continued to grow.
By product classification, the electronic bulk gas business achieved revenue of 1,211 billion yuan, a year-on-year increase of 25.14%, gross margin of 39.10%, a year-on-year decrease of 5.42 pcts. GM's gas revenue was 515 million yuan, up 15.60% year on year, gross margin was 24.35%, down 5.05 pct year on year. By sales model, on-site gas production revenue was 840 million yuan, up 48.91% year on year, gross margin was 41.42%, up 1.44 pct year on year, retail customer revenue was 885 million yuan, up 4.33% year on year, gross margin was 28.31%, down 11.30 pct year on year, mainly due to rising helium procurement costs and falling sales prices. By region, South China, East China, Central China, and North China achieved revenue of 7.72, 6.45, 1.42, and 105 million yuan respectively, with year-on-year increases of 11.81%, 29.70%, 46.05%, and 36.57%, respectively. In 2023, the company's overall gross margin was 35.06%, down 3.21pct year on year, and the net margin was 17.42%, up 1.96pct year on year. The cost rate for the period was 16.35%, down 1.35pct year on year. Sales, management, R&D, and finance expenses rates were 2.10%, 8.71%, 4.84%, and 0.70%, respectively, and -0.72pct, -0.02pct, +0.18pct, and -0.80pct, respectively.
The electronic bulk gas market has broad prospects, and localization is progressing rapidly
With the acceleration of fixed asset investment in the domestic semiconductor and panel industry, the size of the domestic electronic bulk gas market continues to grow. According to the company's prospectus, China's electronics bulk gas market reached 8.6 billion yuan in 2021. Currently, China is actively undertaking the third global semiconductor industry transfer. With the accelerated expansion of global fabs and the gradual release of production capacity, the downstream market demand for electronic bulk gases is broad, and the market space is expected to continue to expand. It is expected that the electronic bulk gas market will reach 12.2 billion yuan in 2025, with a compound growth rate of about 9.14%. Due to the high entry barriers to the electronic bulk gas industry and the long customer entry cycle, it is difficult for domestic gas companies to replace it. For a single on-site gas production project for electronic semiconductor customers, there is usually only one supplier for electronic bulk gas, and the gas supply period is 15 years. Therefore, basically only when the customer has a new production line will have opportunities for new entrants. Customers also have high restrictions on the operating experience of electronic bulk gas suppliers at the time of entry, leading to a prominent “strong person” effect. The industry was once monopolized by Linde Gas, French Liquid Air, and Air Chemical. In 2018, the company won the bid for Huike's on-site gas production project and was efficiently completed and put into operation. For the first time, domestic gas companies achieved a breakthrough in supplying ultra-high purity electronic bulk gases in the semiconductor display field. In 2021, with the accumulation of project experience in the semiconductor display field and the continuous improvement of ultra-high purity gas preparation technology, the company successfully won the bid for the on-site gas production project supporting the integrated expansion of the production line, replacing the foreign-funded gas company selected by the customer for the original project, and achieved a breakthrough in domestic substitution. At present, the company has formed a 3+1 pattern with Linde gas, liquefied air, and air chemicals.
Ongoing orders are plentiful. It is planned to lay out electronic special gas. The price of helium gas gradually bottomed out, and the supply chain continued to consolidate in 2023. The company successively won bids for new electronic bulk gas station projects from customers such as Xi'an Xinxin, Shenzhen Saifan, Guangzhou Guangxin, and Beijing Xilex, and all signed long-term gas supply agreements. Among the new on-site gas generation projects in the domestic integrated circuit manufacturing and semiconductor display fields, the company won the bid for 24.6% of production capacity, ranking second. The total gas consumption of the project is expected to reach 70454 nm3/h. In 2024, the company plans to complete an investment of 1,224 billion yuan to help the company develop with high quality. Furthermore, based on electronic bulk gas, the company also has plans for electronic specialty gases, planning projects such as nitrogen trifluoride (planning production capacity of 3,000 tons) and hydrogen bromide (300 tons), and actively promoting the development and construction of products such as hexafluorobutadiene and high-purity hydrogen chloride. With the implementation of the electronic bulk gas on-site gas production project and electronic special gas, the company is expected to grow rapidly.
In terms of the helium business, the company used the helium business divested by Linde Gas and Plex as an opportunity to enter the global helium supply chain. At the same time, the company has formed purification, storage and transportation, cold box cooling, purification technology, cold magnetism and other technologies through independent research and development, covering the complete supply chain of helium, forming autonomous and controllable technical capabilities. Currently, it is the largest domestic supplier of helium. In 2023, the company's IPO plans to invest 620 million yuan in a construction project for intelligent filling of helium gas and helium-based gas mixtures to consolidate the helium gas supply chain. At present, the price of helium has gradually bottomed out. As helium sales increase, the company's helium business is expected to grow rapidly.
Profit forecast and valuation: The company's net profit for 2024-2026 is estimated to be 363 million yuan, 502 million yuan and 656 million yuan respectively, EPS 0.28, 0.38, and 0.50 yuan, respectively, and PE is 36.3X, 26.3X, and 20.1X, respectively, maintaining a “buy” rating.
Risk warning: 1. Under the on-site gas production model, the economic benefits of the relevant assets are directly related to the corresponding customer's business conditions. If the customer's ability to perform contracts deteriorates, it may lead to the risk of asset impairment. 2. Under the retail gas supply model, the gross margin of gas is affected by factors such as gas market prices and energy costs. If market prices fall or energy costs rise, there is a risk that gas gross margin will decrease. 3. Helium raw materials are mainly imported. If production at the source of the gas falls, it may lead to risks such as an increase in the purchase price of helium gas and a decrease in procurement volume. 4. After the company's new construction project is put into operation, if the gas consumption of on-site gas customers falls short of expectations or the self-built plant market is not sufficiently developed, there may be a risk that the utilization rate of the new production capacity will be low.