Event: The company publishes its 2024 semi-annual report. In the first half of 2024, the company achieved revenue of 0.718 billion yuan, a year-on-year decrease of 3.0%; achieved net profit of 96.15 million yuan, a year-on-year increase of 28.9%; and realized net profit of 91.92 million yuan after deduction, an increase of 34.0% over the previous year. With 2024Q2, the company achieved revenue of 0.385 billion yuan in a single quarter, up 1.0% year on year and 15.8% month on month; realized net profit to mother of 51.05 million yuan, up 47.6% year on year and 13.2% month on month.

Comment:

The gross margin of semiconductor gas and general industrial gas increased, and the company's profit increased year-on-year. In the first half of 2024, the company's specialty gas business achieved revenue of 0.464 billion yuan, and the corresponding gross margin of the corresponding business was 37.3%. Among them, the company's semiconductor gas business achieved revenue of 0.354 billion yuan, and the gross margin of the corresponding business increased 2.4 pct to 36.9% year-on-year. In the first half of 2024, the company's general industrial gas business achieved revenue of 0.129 billion yuan, with a corresponding gross margin of 16.3%, an increase of about 2.3 pcts compared to 2023. The increase in gross margin of general industrial gas is mainly due to the company's self-built transportation fleet, which effectively reduces transportation costs by optimizing the logistics cost structure. In terms of cost ratio, 24H1 company's management expense ratio decreased by 0.84 pct year on year, and sales, R&D, and finance expenses increased by 0.28 pct, 0.17 pct, and 0.04 pct, respectively.

Continue to break through high-end product applications and broaden the business layout in both directions. In terms of high-end applications in advanced semiconductor manufacturing, the company has no less than 20 /13 products/2 products to supply 14 nm/7 nm/5 nm chip advanced process technology in batches. At the same time, the company's products meet the production needs of third-generation semiconductors such as silicon carbide and gallium nitride, and have entered the supply chain of the largest gallium nitride manufacturers and silicon carbide manufacturers in the country. In terms of horizontal expansion, the company set up subsidiaries in Thailand and Malaysia to acquire AIG in Singapore to strengthen overseas production, warehousing, logistics and technical service capabilities; the company accelerated the construction of production bases in Nantong, Southwest China, Jiangxi, etc., to enrich products with large market capacity. In terms of vertical expansion, the company has extended the specialty gas product industry chain. Currently, germanium products have been industrialized and used by semiconductor manufacturers including Korea's largest memory company, South Korea's SK Hynix, and Germany's Infineon; production of the new product ethysilane has been steadily increasing, and it has actively sent samples and certification to customers. In addition, the company laid out to develop silicon-based precursor products in advance and achieved R&D breakthroughs, continuously empowering the company to apply gas types in advanced manufacturing processes.

Profit forecasting, valuation and ratings: Thanks to the increase in gross margin of semiconductor gas and general industrial gas products, 24H1's profit increased significantly, and the performance was in line with expectations. We maintain the company's profit forecast for 2024-2026, and expect the company's net profit to be 0.235, 0.327, and 0.414 billion yuan respectively in 2024-2026. The company maintains high-intensity research and development, expands its business through domestic and foreign base layout and improvement of the product industry chain, and maintains the company's “gain” rating.

Risk warning: Product price fluctuations, downstream demand falls short of expectations, capacity construction risks, product development risks, downstream customer introduction progress falls short of expectations.