Key points of investment

On May 20, 2024, the company issued an announcement on the intention to sign the “Project Investment Agreement” and foreign investment.

Accelerate production capacity planning and superposition to optimize product structure, and steadily increase revenue scale and profitability. The company plans to build the “Eisen Integrated Circuit Material Manufacturing Base” project to further increase the production capacity of products such as photoresists, electroplating solutions, photoresist resins, and high-purity reagents for semiconductors. The company expects the total investment in the project to be no less than 500 million yuan, and the total annual output value after delivery is not less than 800 million yuan.

In 2023, the company achieved revenue of 360 million yuan, an increase of 11.20%; net profit to mother was 32.6573 million yuan, up 40.25% year on year; net profit after deducting non-return to mother was 27.1647 million yuan, up 88.60% year on year; gross profit margin was 27.18%, up 3.85 percentage points year on year; R&D investment was 32.6879 million yuan, up 37.98% year on year.

The steady increase in the company's revenue scale and profitability is mainly due to: 1) the recovery in demand in the domestic semiconductor industry; 2) the company's market share in advanced packaging, wafers and other fields, and progress in electroplating chemicals in the field of new energy; 3) the company continues to optimize its product structure and increase its share of revenue from high-margin products.

24Q1 achieved revenue of 81.8597 million yuan, a year-on-year increase of 14.22%; net profit to mother of 75,101 million yuan, an increase of 112.28%; net profit after deducting non-return to mother of 3.5991 million yuan, an increase of 5.51% year-on-year. The net profit growth rate attributable to mother was much higher than the revenue growth rate, mainly due to the increase in revenue from government subsidies and fund management.

HBM packaging materials have been mass-produced, and many new products are in the certification stage. The company has formed a layout of two major product segments: electroplating solutions, supporting reagents, photoresists, and supporting reagents around the two key process links in the semiconductor manufacturing and packaging process, electronic electroplating and lithography. The company's current mass-produced products such as “advanced packaging negative photoresist”, “electroplated copper base liquid”, “copper-titanium etching solution”, and “electroplated tinned silver additive” can all be used for HBM packaging.

Electroplating solution and supporting reagents: In 2023, electroplating solutions and supporting reagents achieved revenue of 179 million yuan, up 21.80% year on year; gross profit margin was 40.05%, down 3.55 percentage points year on year. The company has a domestic market share of over 20% in the field of integrated circuit packaging and electroplating. On the basis of continuing to consolidate the leading position of traditional packaging in China, the company has gradually achieved breakthroughs in advanced packaging and 28/14nm advanced wafer manufacturing processes. In the field of advanced packaging, the company's copper plating solution for advanced packaging (high-purity copper sulfate) has been officially supplied by Huatian Technology; silver electroplating additives for advanced packaging have been certified by Changdian Technology and are yet to be certified by end customers; electroplating copper additives for advanced packaging have completed testing and certification, and are currently undergoing batch stability verification. In the field of wafers, copper plating additive products for the Damascus copper interconnection process have entered the sample trial production and product certification stage; ultra-high purity cobalt sulfate with the 14nm advanced process has completed sample production, and testing is progressing smoothly on the client; cleaning solutions for the copper process of wafer manufacturing have completed customer testing and certification, and small-batch delivery has been achieved.

Photoresists and supporting reagents: In 2023, photoresists and supporting reagents achieved revenue of 687.732 million yuan, up 18.70% year on year; gross profit margin was 28.27%, up 4.60 percentage points year on year. Using photoresist supporting reagents as an entry point, the company has successfully achieved large-scale supply of products such as adhesion promoters, developer solutions, removers, etching solutions, etc. to packaging manufacturers. In terms of photoresists, g/i line negative photoresists for advanced packaging have been certified by Changdian Technology and Huatian Technology and have been supplied in batches; positive photoresists for OLED array manufacturing (applied to both film layers) and i-line positive photoresists for wafer manufacturing have been certified by BOE and Huahong Hongli respectively and have begun to be supplied in small quantities. Negative PSPI for advanced packaging and positive PSPI for passivation protective layers in wafer manufacturing are being certified by the client.

Investment advice: As the company actively optimizes its product structure and continues to break through in high-margin products used in advanced packaging and wafer manufacturing, we adjusted our original profit forecast for 24/25. It is estimated that from 2024 to 2026, the company's revenue will be 460/5.675 billion yuan, respectively, with growth rates of 27.8%/22.2%/20.0%; net profit to mother will be 0.54/0.73/101 million yuan (the original forecast value for 24/25 was 0.50/0.66 billion yuan), with growth rates of 66.5%/34.3%/38.7%, respectively; PE 52.1/38.8/28.0, respectively. The company is deeply involved in the field of materials with a low localization rate. Many new products are in the certification stage and are being released soon. The penetration rate of superimposed advanced packaging is constantly increasing, and there is sufficient momentum for future growth. Continue to recommend and maintain the “Accumulated Holds-A” rating.

Risk warning: the risk that demand in the downstream terminal market falls short of expectations, the risk that new technology, new processes, and new products will not be industrialized as scheduled, the risk that market competition will intensify, the risk that production capacity expansion will fall short of expectations, systemic risks, etc.