Matters:
The company released its 2024 quarterly report. In 24Q1, it achieved revenue of 297 million yuan, yoy +14.01%; realized net profit to mother of 0.32 million yuan, yoy -42.53%; deducted non-net profit of 31 million yuan, yo +30.17%; gross sales margin was 40.04%, an increase of 6.63 percentage points over the previous year.
Ping An's point of view:
The semiconductor business continued to grow at a high rate, and the paint business was dragged down. 24Q1 achieved total revenue of 297 million yuan, of which the semiconductor business achieved operating income of 206 million yuan, an increase of 30.07% over the previous year. The business achieved net profit of 26.27 million yuan after deducting non-recurring profit and loss, an increase of 34.79% over the previous year. The volume and price of core wet electronic chemicals increased by 6.63 percentage points to 40.04% year on year; the paint sector business was affected by adverse factors such as the continued downturn in the construction industry market and falling product sales prices. The first quarter achieved revenue of 91 million yuan, a year-on-year decrease of 91 million yuan. 9.77%
Continue to increase investment in semiconductor material research and development. 2024Q1's R&D expenses were 46.114 million yuan, an increase of 51.24% over the previous year, accounting for 15.50% of the current revenue (11.69% in the same period in 2023), mainly due to increases in R&D personnel remuneration and equipment depreciation. In terms of specific product development, the company actively lays out products such as photoresists for integrated circuits, advanced process wet etching solutions, cleaning fluids, additives, and chemical mechanical grinding fluids. According to the company's 2023 annual report, R&D investment in the semiconductor business has grown at an average annual compound rate of nearly 30% since its launch. The company attaches great importance to improving independent research and development capabilities for semiconductor materials, and the production and research process for related products is progressing smoothly.
Actively participate in investing in semiconductor industry funds to help the development of national semiconductor storage, etc. The company actively participated in the semiconductor industry chain fund investment. In addition to projects such as Suzhou Anxin Tongying (20 million yuan pledged), Jiangsu Xinchao Wanxin (40 million yuan pledged), and Ningbo Hongwei (42.4 million yuan pledged), and 24Q1 added investment in Qihang Hengxin Industrial Investment Fund (the company pledged 10 million yuan as a limited partner) to help the rapid development of the national semiconductor storage industry chain.
The equity incentive plan is promoted to stabilize core technical personnel. The company has now implemented four equity incentive plans (Core Journey Phase I and Phase II, New Growth Phase I and Phase II), and the 2024 new Core Journey (Phase III) shareholding plan has now been reviewed and approved. The participants are core technologies/business personnel in the semiconductor business. The price of purchasing repurchased shares under this shareholding plan is 17.34 yuan/share, and the maximum amount of capital to be raised is RMB 31.21 million. At the same time, the 2024 Company Stock Value-added Incentive Plan has also been reviewed and approved. This incentive plan involves granting incentives to a total of 6 people, mainly directors and senior managers. The number of stock value-added rights was 257,800 shares, accounting for 0.08% of the company's total share capital of 313.3814.02 million shares on the day the draft incentive plan was announced, and the exercise price for granting stock value-added rights was 17.34 yuan/share.
Investment suggestions: The company continues to advance the R&D and production process of high-end semiconductor materials. New construction projects are progressing as scheduled, production capacity is being expanded and products are diversified. The core semiconductor business continues to show good growth. The fundamental expectations of the downstream semiconductor industry gradually improve in 2024, and the localization of high-end electronic materials accelerates, and the company's performance is expected to grow.
It is estimated that 2024-2026 will achieve net profit of 2.02, 281, and 364 million yuan (unchanged from the original value). The PE corresponding to the closing price of April 19, 2024 is 49.2, 35.4, and 27.4 times, respectively. Considering the expansion of the company's semiconductor business scale and performance growth, the terminal fundamentals are expected to gradually recover, and maintain the “recommended” rating.
Risk warning: 1. The growth rate of terminal demand falls short of expectations. If the fundamentals of the semiconductor and other terminal industries fall short of expectations and demand is difficult to recover, the growth rate of the company's electronic chemicals business may be limited. 2. The risk of increased market competition and a sharp decline in product prices. If comparable companies achieve technological breakthroughs and drastically increase the scale of production capacity, it may cause the risk of overcapacity for some products and increased market competition, which in turn will lead to a decline in the prices of related products, and gross profit will be drastically reduced. 3. The risk of large fluctuations in raw material prices. If basic chemical raw materials are affected by factors such as extreme climate and overseas geopolitics, manufacturers are prevented from starting construction, and the fundamentals of supply and demand and inventory structure change greatly, the price of raw materials may fluctuate greatly, causing the company's production costs to rise sharply.