Key points of investment:

The company released its 2024 mid-year report: During the reporting period, the company achieved revenue of 0.718 billion yuan (YoY -3%), achieved net profit attributable to mother 0.096 billion yuan (YoY +29%), and realized net profit deducted from non-mother of 0.092 billion yuan (YoY +34%).

Among them, 24Q2 achieved revenue of 0.385 billion yuan (YoY +1%, QoQ +16%), net profit attributable to mother of 0.051 billion yuan (YoY +48%, QoQ +13%), and realized net profit of 0.048 billion yuan (YoY +62%, QoQ +11%). The single quarter results were in line with expectations. 24Q2's gross sales margin was 30.39%, with year-on-month changes of +2.14pct and -2.65pct, net profit margin of 13.29%, and +4.15pct and -0.33pct, respectively. In terms of costs, 24Q2 remained stable.

The semiconductor cycle is picking up and entering an upward phase, and the company's performance is growing steadily under the trend of domestic substitution. Since 2024, the operating rate of global wafer factories has continued to pick up, industry fundamentals have continued to improve, and it has officially entered an upward boom cycle. As an important supplier in the domestic electronic specialty segment, the company has achieved customer coverage of more than 90% for domestic 8-inch and above integrated circuit manufacturers. At the same time, it has successfully entered the supply system of leading overseas semiconductor companies such as Intel, Micron, Hynix, and Samsung. The recovery of the industry has driven the company's business to gradually resume growth. Looking ahead to 24H2 and beyond, the boom in the semiconductor industry is expected to continue, compounded by the resumption of growth in capital expenditure in the superposition, and the company's new products and production capacity such as germanium, ethysilane, and perfluorobutadiene. The company's performance is expected to continue to improve quarter by quarter.

Continuous breakthroughs have been made in the field of high-end applications, the construction of new projects is progressing in an orderly manner, and the layout at home and abroad is seeking long-term development. The company adheres to a variety of specialty gas development strategies, with high-end products as the main focus. Currently, the downstream has basically covered domestic 12-inch fabs. More than 20 products have been supplied to 14nm, 7nm and other production lines, and some fluorocarbon products and hydrides have entered the 5nm advanced process process. In terms of project construction, the infrastructure for the Jiangxi IPO fundraising project was completed and production capacity was released in an orderly manner; in March 2023, the company completed the issuance of convertible bonds to build a semiconductor material project with an annual output of 1,764 tons in Jiujiang, Jiangxi; in addition, the company had project construction plans in Zigong, Sichuan and Rudong, Jiangsu, and the regional strategic layout was continuously improved. In October 2023, the company announced that it plans to invest 0.8 billion yuan to build a semiconductor gas R&D and production center. The implementation of the project will help relieve some of the production capacity pressure at the Foshan headquarters.

In terms of overseas layout, the company gradually converted overseas sales to direct sales through the acquisition of the new AIG. At the same time, it also invested in on-site gas production projects in Thailand, and the scope of business coverage continued to expand.

Investment analysis opinion: Maintain the company's 2024-2026 net profit forecast of 0.233, 0.305, and 0.396 billion yuan. The current market capitalization corresponds to PE of 23, 18, and 14X, respectively, to maintain the “gain” rating.

Risk warning: 1) Downstream demand falls short of expectations; 2) Project progress and product introduction fall short of expectations; 3) Prices of raw materials have risen sharply.