Key points of investment

Deeply cultivate electroplating solutions and supporting reagents+photoresists and supporting reagents, and the overall solution capability deepens barriers. Starting with electroplating products with traditional semiconductor packaging, the company has gradually mastered a full range of electronic chemicals for pin surface treatment, including electroplating solutions and pre- and post-plating treatment chemicals. After years of hard work, the company gradually replaced foreign material companies as the main domestic supplier in the field of traditional packaging and electroplating chemicals, and gradually expanded into advanced packaging, wafer manufacturing and display panels, forming two major business segments: electroplating solutions and supporting reagents, photoresists and supporting reagents. In '23, the company achieved revenue of 0.36 billion yuan, +11.20% year over year; net profit to mother of 32.6573 million yuan, +40.25% year over year; gross profit margin of main business 27.39%, +3.86pcts year over year. By product, the company's electroplating solution and supporting reagents/electroplating supporting materials/photoresists and supporting reagents achieved revenue of 0.178/0.095/0.069 billion yuan respectively, +21.80%/-15.70%/+18.70%, achieving gross profit margin of 40.05%/28.27%, respectively, and -3.55pcts/+5.17pcts/+4.60pcts year-on-year. Relying on its own core technologies such as formula design, process preparation and application technology, the company provides customers with overall solutions (turnkey) for key process links to meet customers' specific functional requirements for electronic chemicals, and has established stable cooperative relationships with well-known manufacturers such as Changdian Technology, Tongfu Microelectronics, Huatian Technology, Riyuexin, and Guoju Electronics.

Electroplating solutions and supporting reagents are expanding from traditional packaging to advanced packaging and wafer manufacturing, and new products such as silver plating additives for advanced packaging are expected to be released. In terms of electroplating solutions and supporting reagents, the company has gradually achieved breakthroughs in advanced packaging and advanced 28nm and 14nm wafer manufacturing processes on the basis of continuing to consolidate its leading position in traditional packaging in China. 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, the company's Damascus copper interconnection process copper plating additive products have entered the sample trial production and product certification stage; the 14nm advanced process ultra-high purity cobalt sulfate has completed sample production, and client testing is progressing smoothly; the cleaning solution for the copper process of wafer manufacturing has completed customer testing and certification, and small-batch delivery has been achieved. According to the China Electronic Materials Industry Association, the overall market size of wet chemicals for integrated circuits in China is expected to grow from 5.69 billion yuan in 22 to 7.13 billion yuan in 25 in the field of integrated wafer manufacturing and back-end packaging. In terms of integrated circuit electroplating materials market segments, according to TECHCET, the global semiconductor electroplating chemicals market is expected to grow from 0.992 billion US dollars in 23 to 1.047 billion US dollars in 24. The main growth drivers include the increase in interconnect layers in integrated circuits and the use of RDL and copper bumps in advanced packaging. Demand for copper interconnect materials for advanced process node logic devices will continue to grow as copper wiring continues to follow the Damascus process.

Focus on photoresists for advanced packaging, photoresists for OLED array manufacturing, and photoresists with special processes such as PSPI for wafers to solve the problem of key semiconductor materials stuck in necks. In terms of photoresists and supporting reagents, the company has successfully achieved large-scale supply of products such as adhesion promoters, developer solutions, removers, etching solutions, etc. to downstream packaging manufacturers using photoresist supporting reagents as entry points. At the same time, the company is actively developing photoresist research and development, using photoresists with special processes such as advanced packaging negative photoresists, OLED array manufacturing photoresists, and PSPI for wafers as breakthroughs, covering application fields such as wafer manufacturing, advanced packaging and display panels, successfully breaking foreign monopolies and gradually extending to advanced manufacturing processes. Currently, the company has developed its own g/i line negative photoresists for advanced packaging and i-line positive photoresists for wafer manufacturing have all been supplied in batches. In '23, the company's photoresist achieved revenue of 12.0034 million yuan, +38.65% over the same period last year.

According to the China Electronic Materials Industry Association, 1) China's integrated circuit g/i line photoresist market is expected to grow from 0.914 billion yuan in '22 to 1.009 billion yuan in '25. Among them, the g/i line photoresist market for integrated circuit packaging in China is expected to grow from 0.547 billion yuan in '22 to 0.595 billion yuan in '25. 2) The market size of OLED photoresists in China, where positive photoresists for OLED arrays belong, is expected to grow from 0.093 billion yuan in '22 to 0.16 billion yuan in '25. The market is currently dominated by international companies, which are one of the few domestic companies that develop products in this segment. 3) The PSPI market size for integrated circuit wafer manufacturing in China is expected to grow from 0.712 billion yuan in '21 to 0.967 billion yuan in '25.

Investment advice

We expect the company to achieve revenue of 0.448/0.547/0.668 billion yuan in 2024/2025/2026, and realized net profit of 0.05/0.07/0.1 billion yuan respectively. The current stock price corresponding to 2024-2026 PE is 71 times, 49 times, and 34 times, respectively, covered for the first time, giving it a “buy” rating.

Risk warning

Market competition risk, risk of industrialization of self-developed photoresist products, risk of declining gross margin, risk of negative operating cash flow, risk of fluctuating raw material prices, risk of changes in the semiconductor industry cycle, risk of small market segmentation, risk of absorption of additional production capacity in capital raising investment projects.