Incidents:

On April 12, 2024, the company released its 2023 annual report: in 2023, the company achieved operating income of 1.5 billion yuan, a year-on-year decrease of 16.8%; realized net profit of 171 million yuan, a year-on-year decrease of 17.18%.

Opinions:

Raw material prices have declined, and the cycle has declined, and performance is temporarily under pressure. In 2023, the price of rare gas raw materials fell compared to the same period in 2022, and the sales price of the company's specialty gas products declined; at the same time, consumer electronics were still in a downward cycle during the year, and the utilization rate of downstream semiconductors declined. Due to two factors, the company's revenue and profit declined in 2023: revenue of 1.5 billion yuan, a year-on-year decrease of 16.8%, with revenue from welding insulated gas cylinders and their ancillary equipment, lithography and other gas mixtures falling a lot; the company completed issuing convertible bonds during the year, and financial expenses increased a lot year-on-year. The company achieved net profit of 171 million yuan, a year-on-year decrease of 17.18%, and realized net profit deducted from non-mother 161 million yuan, a year-on-year decrease of 20%.

Domestic substitution trends have been determined, and development of new products is progressing smoothly. According to predictions from SEMI and other institutions, global semiconductor equipment investment may bottom out and rebound in 2024, driving a recovery in upstream and downstream related industries. In terms of electronic specialty gas, domestic substitution trends have been determined. The company is leading the way in domestic gas substitution, and continues to increase R&D investment. The R&D cost rate during the year was 3.36%, an increase of 0.03 pct compared to 2022, while enhancing its core competitiveness through strategies such as industrial chain extension and mergers and acquisitions. The issuance of the company's convertible bonds is completed during the year, and new projects such as fund-raising projects and new projects such as Nantong are gradually implemented, which will enhance the company's product line supply capacity. According to the company's announcement, the dividend rate for 2023 is 35.03%, and the dividend rate will reach 46.62% after considering the repurchase plan.

Profit forecast and investment rating: We expect the company to achieve net profit of RMB 231 million, RMB 292 million and RMB 370 million respectively in 2024-2026, corresponding to PE of 23.23, 18.37, and 14.52, respectively. First coverage, giving a “buy” rating.

Risk warning: Downstream demand recovery falls short of expectations; fund-raising projects fall short of expectations; prices of upstream raw materials fluctuate greatly; geopolitical risks; the cited data sources may have errors or deviations; the risk level of science and technology innovation board stocks is R4, which can only be used by customers who meet the company's appropriateness management requirements.