Event: On April 25, 2024, Dinglong Co., Ltd. released its report for the first quarter of 2024. In the first quarter of 2024, the company achieved revenue of 708 million yuan, an increase of 29.50% year on year; realized net profit of 82 million yuan, up 134.86% year on year; realized deducted non-net profit of 66 million yuan, an increase of 213.71% year on year.
The performance was outstanding, and the CMP material layout continued to improve. The company performed well in the fields of CMP process materials and wafer photoresists for semiconductor manufacturing, semiconductor display materials, and advanced semiconductor packaging materials, which were specifically reflected in 24Q1: (1) CMP polishing pads: achieved product sales revenue of 135 million yuan, an increase of 110.08% over the previous year, laying a good foundation for the continuous quarterly volume of the polishing pad business this year. (2) CMP polishing liquid and cleaning liquid: Achieved product sales revenue of 35.92 million yuan, an increase of 24.31% over the previous year, and a year-on-year increase of 206.00%. The quantity and introduction verification of various types of products progressed steadily. (3) Semiconductor display materials:
Achieved product sales revenue of 70.21 million yuan, a slight increase over the previous month, and a year-on-year increase of 436.49%. Product penetration and cooperation with important downstream panel customers continued to deepen. (4) General consumables sector for printing and copying: Product sales revenue remained flat and increased slightly year-on-year, business conditions remained stable, and special work such as management optimization, efficiency improvement, cost reduction and fee control continued. Furthermore, the verification and introduction of the company's high-end wafer photoresist and semiconductor advanced packaging materials business is progressing in an orderly manner. Although related products have not yet obtained sales revenue, they have provided a solid foundation for the sustainable development of the company's future business.
Profitability is expected to increase with the acquisition of a portion of the subsidiary's shares. In order to enhance the future profitability of listed companies and promote the sustainable development of the company, further optimize the equity structure and asset structure of Rouxian Technology, improve the efficiency of management decisions, and reduce the ratio of related transactions between the company and controlling shareholders. On March 13, '24, the company announced the acquisition of 6.83% of Rouxian Technology's shares held by Qushui Taihao at a purchase price of 31.495 million yuan; the acquisition of 5.17% of Rouxian Technology's shares held by Mr. Li Wenchao at a purchase price of 24.1709 million yuan. After the transaction was completed, the company's shareholding ratio of Rouxian Technology was changed from 70% to 82%. Rouxian Technology is still a holding subsidiary within the scope of the company's consolidated statements.
Repurchase shares to cancel EPS and protect the interests of the majority of shareholders. As of March 5, '24, the total number of shares repurchased by the company through centralized bidding transactions through a special securities account was 7,448,800 shares, accounting for 0.79% of the company's total share capital, and the total amount paid was 150,009,045 yuan (not including transaction fees). The actual total amount of share repurchase capital in this repurchase plan has exceeded the lower limit of the total share repurchase capital in this repurchase plan, and the total share repurchase period expires early from the date the implementation was completed. The purpose of repurchasing shares was changed from “to implement employee stock ownership plans or equity incentives” to “to cancel and reduce registered capital accordingly”. The matter still needs to be submitted to the 2023 Annual General Meeting of Shareholders of the Company for consideration. This move is conducive to further enhancing EPS and safeguarding the interests of investors.
Investment advice: We are optimistic about the company's platform-based R&D capabilities in the field of optoelectronic semiconductor materials and the gradual expansion of new business product lines. The company's net profit for 2024-2026 is estimated to be 414/5.63/750 million yuan, respectively, and the current price corresponding to PE is 51/37/28 times, respectively, maintaining the “recommended” rating.
Risk warning: downstream development falls short of expectations, R&D progress falls short of expectations, market competition intensifies, etc.