Matters:

The company released its 2024 semi-annual report. 24H1 achieved revenue of 1.122 billion yuan, yoy +35.86%; realized net profit of 0.179 billion yuan, yoy +17.38%; and deducted non-net profit of 0.137 billion yuan, yoy +21.74%. 24Q2 achieved revenue of 0.613 billion yuan, yoy +43.28%, qoq +20.42%; realized net profit to mother 0.097 billion yuan, yoy +25.00%, qoq +17.62%.

Ping An's point of view:

Sales volume and gross margin of precursor materials increased, and business growth was strong. 2024H1, the company's production of precursor materials (including MO source) was 143.2 tons, with a capacity utilization rate of 75.03%; sales volume was 164.05 tons, up 99.81% year on year; the business achieved revenue of 0.274 billion yuan, yoy +73.57%, accounting for 24.4% of total revenue, domestic and foreign sales revenue of 0.255 billion yuan and 0.18 billion yuan respectively; gross sales margin was 48.45%, an increase of 12.93 percentage points over the previous year. At present, the company has achieved full coverage of the main categories of silicon precursors/metal precursors and high-K precursors/low precursors required for wafer manufacturing. During the reporting period, mass production of nearly 10 products was stable. Various products continued to be introduced into the integrated circuit mass production process, and the business growth momentum was strong. This material has become one of the main sources for the increase in the company's performance. At the same time, the industrialization project for advanced semiconductor processes with an annual output of 45 tons achieved an efficiency of 14.197 million yuan during the reporting period.

Revenue from hydrogen speciality gas phosphane mixtures is growing rapidly, and sales are still showing positive growth due to the increase in nitrogen trifluoride volume.

2024H1's specialty gas product output was 5338.6 tons, capacity utilization rate 91.39%, production capacity under construction; sales volume was 5159.4 tons, yoy +11.61%; the business achieved revenue of 0.716 billion yuan, yoy +16.05%, accounting for 63.8% of total revenue. Domestic and foreign sales revenue were 0.654 billion yuan and 62 million yuan respectively; gross sales margin was 46.51%, down 0.79 percentage points year on year. During the reporting period, sales revenue of hydrogen specialty gases achieved rapid growth, with phosphane mixtures growing the fastest; gross margin of nitrogen trifluoride, the key product of fluorine gas, declined due to intense competition and falling prices, but with the acceleration of the 7,200-ton electronic-grade nitrous trifluoride project in Ulanqab, sales volume and sales still achieved positive growth.

It has full independent production capacity for photoresists and supporting materials, and three ArF photoresists have been sold.

The photoresist R&D center of Ningbo Nanda Optoelectronics, a holding subsidiary, has the ability to develop photoresist materials such as functional monomers, functional resins, and photosensitizers, and can achieve full autonomy from photoresist raw materials to photoresist products and supporting materials. Currently, the three ArF photoresist products developed have been certified and sold to downstream customers, and many products are being certified by major customers.

Investment suggestions: In terms of fluorine-based specialty gases, the company's large-scale fluorine-containing specialty gas projects in Ulanqab will continue to advance, and the scale of the special gas business will be further expanded; in terms of hydrogen specialty gases, phosphane mixtures have entered the photovoltaic market, and sales are expected to grow rapidly; in terms of semiconductor precursor materials, various products have achieved stable mass production, continue to be introduced into integrated circuit mass production processes, and business growth is strong; in terms of photoresist and supporting reagents, some products have been sold, and customer certification is expected to continue. Achieve increased performance. At the industry level, inventory removal in the terminal semiconductor and panel industry is improving, demand is gradually picking up, and demand for materials such as electronic specialty gases and precursors is expected to gradually rise. In 2024-2026, the company is expected to achieve net profit of 0.263, 0.351, and 0.421 billion yuan (unchanged from the original value), corresponding to the closing price PE on August 29, 2024, which is 52.5, 39.3, and 32.8 times. In 2024-2026, as the company's various projects continue to advance, mass production and sale of various high-end high-barrier semiconductor materials, the company's performance is expected to grow and maintain the “recommended” rating.

Risk warning: 1) The growth rate of terminal demand falls short of expectations. If the fundamentals of the semiconductor and other terminal industries fall short of expectations and demand is difficult to recover, the growth rate of the company's electronic chemicals business may be limited. 2) The risk of increased market competition and a sharp decline in product prices. If comparable companies achieve technological breakthroughs and drastically increase the scale of production capacity, it may cause the risk of overcapacity for some products and increased market competition, which in turn will lead to a decline in the prices of related products, and gross profit will be drastically reduced. 3) Risk of technological breakthroughs and blocked customer certification. If the company's core high-barrier product technology is difficult to break through, or if it is difficult to advance certification for downstream clients, the project process may be delayed, and the original plan may be difficult to achieve.