Description of the event
The company released its 2024 quarterly report, achieving operating income of 780 million yuan (+17.6% YoY, +4.6% month-on-month), realized net profit of 140 million yuan (+74.3% YoY, +155.1%), and realized non-net profit of 80 million yuan (+4.0% YoY, +38.5% YoY).
Incident comments
2024Q1's product sales increased dramatically, and gross margin increased year-on-month. With the recovery of the downstream tire rubber sector and the company's electronic chemicals being put into production one after another, the company's sales volume of specialty rubber additives and electronic chemicals increased dramatically in the first quarter, to 38103 and 3674 tons, respectively, +16.9%, +28.4%, and +6.3% and +3.6% month-on-month. 2024Q1's gross margin was 24.8%, +0.3 pct year on year, +2.0pct month on month; 2024Q1 had impressive non-recurring profit and loss contribution performance, reaching 60 billion yuan, with a net profit margin of 18.9%, +6.9 pct year on year, +11.2 pct month on month. In addition, the company's investment income in joint ventures and joint ventures was 40 million yuan, mainly due to the 8.9% equity contribution of participating in Zhongce Rubber.
The photoresist business is growing rapidly. In terms of semiconductor photoresists, the company achieved revenue of 200 million yuan in 2023, +14.1% year-on-year. Consumer demand was weak. Under the downward trend in global wafer manufacturing, the company's semiconductor photoresist business bucked the trend. Among them, KrF photoresists grew rapidly year on year, and ICA photoresists grew at a rate of 335%. In terms of display panel photoresists, its display panel photoresists achieved revenue of 260 million yuan in 2023, or +22.8%. The domestic market share for panel photoresists was about 22.1%. Beixu Electronics is the largest domestic supplier. It has made significant progress in the AMOLED application market, and high-resolution photoresists and low-temperature photoresists have achieved mass production and sales respectively. It is expected that as the company's customers gradually break through, new factory production lines are launched one after another, and product supply and sales capabilities are greatly enhanced, the photoresist industry is expected to maintain rapid growth. ArF photoresists have made a major breakthrough. In 2023, the company achieved a major breakthrough in ArF photoresists. The first batch of ArF photoresists were able to match the products of major international photoresist manufacturers. Some of these ArF photoresists passed downstream customer product certification in the first quarter of 2024, and are preparing to begin production in the second quarter of 2024. The current production capacity can simultaneously supply most domestic chip manufacturers, and can also meet the demand for advanced domestic photoresists.
The Shanghai photoresist factory has been partially completed and will be gradually completed in 2024. The company's annual output of 11,000 tons of semiconductors, photoresists for flat panel displays, and 20,000 tons of related supporting reagents has been partially completed. The products cover high-end photoresists such as semiconductor photoresists, panel adhesives, EBR and other high-end photoresists and their supporting products. Each production line will be gradually completed in 2024, helping the company continue to improve its photoresist business R&D and mass production capacity.
Maintain a “buy” rating. The company is a domestic leader in special rubber additives and photoresists, and has excellent research and development capabilities. Special rubber additives are expected to benefit from the recovery in tire demand and continued breakthroughs in photoresists, which are expected to continue to grow rapidly, helping the semiconductor industry chain to replace domestic production and become autonomous and controllable. The net profit for 2024-2026 is estimated to be 5.3, 6.8, and 780 million yuan, maintaining a “buy” rating.
Risk warning
1. The macroeconomic economy fell short of expectations;
2. Product verification falls short of expectations.