Semiconductor materials, photoresists, and LNG insulation materials contributed to rapid growth in performance. In the first half of 2024, the company achieved operating income of 3.257 billion yuan, a year-on-year increase of 40.21%; realized net profit to mother of 0.52 billion yuan, an increase of 52.19% year-on-year, after deducting net profit of 0.526 billion yuan.

Among them, second-quarter revenue was 1.638 billion yuan, up 30.91% year on year, up 1.25% month on month, and net profit to mother was 0.274 billion yuan, up 62.44% year on year and 11.28% month on month. Semiconductor chemical materials achieved revenue of 0.92 billion yuan, an increase of 42.64% year on year, photoresists and supporting reagents achieved revenue of 0.86 billion yuan, an increase of 53.46% year on year, and LNG insulation materials achieved revenue of 0.72 billion yuan, an increase of 47.08% year on year.

The company's new material product certification process is progressing smoothly. The company's precursor materials have achieved full coverage of major domestic memory chip and logic chip manufacturers, further increased its market share, and began sample testing for manufacturers of functional chips such as power devices, RF, and graphics processing. The company's Jiangsu Xianke localization project has been successfully built. Products such as HCDS, TMA and TiCl4 have been verified by different clients and officially supplied. In the first half of 2024, Jiangsu Xianke passed audits and on-site audits from various suppliers such as Huaxing Optoelectronics, Huike, and BOE respectively. A number of photoresist products entered the mass production and delivery stage on the client side. The construction of the company's OCPS photoresist production line was completed, and the products are being introduced and tested on the client. Huzhou Yake Huafei Electronic Materials Co., Ltd., a subsidiary of Huafei Electronics, has basically completed the construction of the first phase of the “0.039 million ton semiconductor core material project”. Currently, small-batch production of products to supply high-quality and stable raw materials to Huafei Electronics has begun. The LNG shipping and storage segment continues to develop and grow.

Benefiting from the continued boom in the downstream shipbuilding industry and the growing demand for insulation materials from domestic and foreign companies, the company's LNG insulation board business is developing steadily.

The company plans to invest in the construction of an electronic materials project with an annual output of 0.024 million tons. On August 28, 2024, the company plans to invest 0.897 billion yuan in an electronic materials project with an annual output of 0.024 million tons. The project cycle is about 2 years, and it is expected to be completed in December 2025. Products include electronic powder materials such as spherical silicon dioxide and spherical alumina. Spherical silicon powder is used in consumer electronics, household appliances, mobile communications and other industries. Spherical alumina is currently the main application material for thermal conductivity and heat dissipation and high-power chips, and is a key filler for HBM. After completion, the project is expected to further improve the company's industrial chain in the silicon powder business and enhance the competitiveness of the enterprise.

Profit forecasting and investment ratings. We expect the company's net profit for 2024-2026 to be 0.963 billion yuan, 1.309 billion yuan, and 1,719 million yuan, corresponding to EPS of 2.02 yuan, 2.75 yuan, and 3.61 yuan, respectively. Referring to the valuation of comparable companies in the same industry, the reasonable valuation is 35-40 times PE in 2024, and the corresponding reasonable value range is 70.70-80.80 yuan, maintaining an superior market rating.

Risk warning: Production expansion projects fall short of expectations; downstream demand falls short of expected risk.