Incident: The company released its 2024 quarterly report. During the reporting period, it achieved operating income of 202 million yuan, a year-on-year increase of 39.46%, and net profit of 52 million yuan, up 79.94% year-on-year, 6.12% month-on-month, after deducting non-net profit of 46 million yuan, up 99.97% year-on-year and 7.0% month-on-month.
Product structure optimization boosts gross margin, and the share of high-end products continues to rise. During the reporting period, the company's comprehensive gross profit margin was 40.7%, up 4.1 pct year on year and 3.4 pct month-on-month. Along with the recovery in downstream market sentiment, the company's order situation in the first quarter was good. The company keeps an eye on trends in downstream fields such as EMC, LMC, GMC, UF, electronic circuit substrates, thermal interface materials, etc., and continues to launch various low-cut-point lowα micron/sub-micron spherical silicon powder, spherical alumina powder with low cut-point specifications, low loss/ultra-low loss spherical silicon powder for high-frequency high-speed copper clad plates, and micron/sub-micron spherical alumina powder with high thermal conductivity for new energy batteries. The sales volume of spherical products continues to increase.
Focus on high-end product development, and new projects further meet market needs. The company continues to focus on advanced technologies in downstream applications such as high-end chip (AI, 5G, HPC, etc.) packaging, heterogeneous integrated advanced packaging (Chiplet, HBM, etc.), next-generation high-frequency high-speed copper clad plates (M7, M8, etc.), high thermal conductivity interface materials for new energy vehicles, advanced millimeter wave radar, and photovoltaic cell adhesives. The company plans to invest 128 million yuan to build an electronic-grade functional powder material project with an annual output of 25,200 tons, and plans to invest 129 million yuan to implement an ultra-fine spherical powder project with an annual output of 3,000 tons of advanced integrated circuits. The completion of the construction will continue to meet the higher and higher characteristic requirements for electronic-grade functional powder materials for integrated circuits in application fields such as high-frequency high-speed substrates for 5G communications, IC carrier boards, high-end chip packaging, etc., and continuously improve the production capacity layout of the company's spherical products.
There is plenty of room for domestic replacement of spherical silicon powder, and the prospects for developing new products are broad. Japanese companies account for 70% of the global spherical silicon powder market. Japan's Yadoma has a monopoly on the spherical silicon powder filler market below 1 micron, and there is plenty of room for domestic replacement. The development of the AI industry drives HBM emissions, which will cause problems of increased packaging height and high heat dissipation requirements. Granular packaging materials (GMC) require the addition of spherical silicon below TOP CUT 20um and Lowα spherical aluminum. Some of the company's customers are world-renowned GMC suppliers, supplying spherical silicon and Lowα spherical aluminum used in HBM packaging materials GMC. The company strengthens research and development of functional powder materials such as high-performance spherical titanium dioxide and advanced nitride powders, and has good development prospects.
Maintain a “Highly Recommended” investment rating. From 2024 to 2026, the company's net profit is estimated to be 223 million, 276 million yuan, and 342 million yuan, EPS is 1.20, 1.48, and 1.84 yuan respectively. The current stock price corresponds to PE 40, 32, and 26 times, respectively, maintaining a “highly recommended” rating.
Risk warning: Energy costs are rising, new projects are being put into production below expectations, and downstream demand falls short of expectations.