Event: The company released its 2024 three-quarter report. In the first three quarters of 2024, the company achieved revenue of 1.06 billion yuan, a year-on-year increase of 10.56%; realized net profit of 0.665 million yuan, a year-on-year decrease of 97.04%; and realized net profit without deduction of -11.83 million yuan, a year-on-year decrease of 123.50%. With 2024Q3, the company achieved revenue of 0.367 billion yuan in a single quarter, up 10.76% year on year, up 0.71% month on month; realized net profit to mother of 5.64 million yuan, a decrease of 51.91% year on year, and an increase of 39.43% month on month.

Comment:

Sales of high-purity chemicals continued to increase steadily, and gross margin improved markedly in 24Q3. Benefiting from the continued recovery of the downstream semiconductor market and the continuous increase in the utilization rate of the company's own equipment production capacity, the company has continued to release high-purity chemicals since 2024, which in turn has led to a steady increase in the company's revenue. At the same time, thanks to the increase in the company's own capacity utilization rate, the decline in the price of upstream raw materials, and the company's active layout on the upstream raw materials side, the overall gross margin of the 24Q3 company improved significantly from month to month. In 24Q3, the company's gross margin in a single quarter was 22.4%, up 6.6pct month-on-month, and down 2.0pct year-on-year. Although the wet electronic chemicals industry is still at the bottom of the cycle, the company continues to increase investment in R&D in order to gain strength when the industry returns to the upward boom cycle.

2024Q3, the company's R&D expenses in a single quarter were 29.66 million yuan, the highest value in a single quarter in history, up 31.5% year on year; the R&D cost rate was 8.1%, up 1.3 pct year on year, and 0.6 pct month on month.

Domestic wet electronic chemicals leader to promote product introduction and capacity building. The company currently has four bases in the field of high-purity wet chemicals, and corresponding investment and construction have basically been completed. The company has built a production capacity of more than 200,000 tons of high-purity sulfuric acid, high-purity hydrogen peroxide, etc., ranking first in the industry. Among them, the company is the largest supplier of high-purity hydrogen peroxide in China, with a market share of about 40%. In terms of photoresists, the company fully cooperated with Sinopec Group in the field of DUV photoresists, mass-produced and shipped a variety of KrF photoresists, and various ArF photoresists are in the customer verification stage. In addition, in the first half of 2024, the company raised 0.45 billion yuan of capital, mainly to build a “project with an annual output of 0.02 million tons of gamma-butyrolactone, 0.1 million tons of electron-grade NMP, 0.02 million tons of NMP recycling and 0.01 million tons of conductive paste.”

Profit forecasting, valuation and ratings: Benefiting from the company's continued release of high-purity chemicals, the company's revenue grew steadily.

However, since the current price and profitability of high-purity chemicals are still at the bottom of the cycle, the company's performance fell short of expectations.

We lowered the company's profit forecast for 2024-2026. We expect the company's net profit to be 0.036/0.101/0.134 billion yuan in 2024-2026 (previous values were 0.091/0.146/0.179 billion yuan, respectively). The company is a leader in the domestic wet electronic chemicals industry. As the semiconductor industry continues to recover, the company will continue to benefit and maintain the company's “buy” rating.

Risk warning: Product and raw material prices fluctuate, downstream demand falls short of expectations, customer introduction progress falls short of expectations, capacity construction risks, product development risks.