Incident: On October 25, 2024, the company released its three-quarter report for 2024. The company achieved total revenue of 2.425 billion yuan in the first three quarters, +10.45% year-on-year, and realized net profit to mother of 0.439 billion yuan, or +25.31% year-on-year. Among them, Q3 achieved revenue of 0.849 billion yuan in a single quarter, +2.72% year-on-year, and realized net profit of 0.125 billion yuan to mother, or -1.13% year-on-year.

Comment:

The volume and price of electronic chemicals have risen sharply, driving the company's performance growth. In the first three quarters of 2024, the company produced 0.109 million tons of specialty rubber additives, with an average sales volume of 0.0157 million yuan/ton, with an average price of 0.0157 million/ton, price -1.81% year-on-year, and Q3 price +1.16%; electronic chemicals produced 0.0123 million tons and sold 0.012 million tons, with an average price of 0.0451 million yuan/ton, with a price of +16.06% month-on-month in Q3.

Semiconductor material projects such as photoresists and polishing pads continue to advance, and the company has broad room for growth. The company has a production capacity of 8,000 tons of photoresist for tablets in Qianjiang. It is the first TFT-LCDArray photoresist manufacturer in China and the largest domestic supplier of LCD positive photoresist. The project with an annual output of 0.011 million tons of semiconductors, photoresists for flat panel displays, and 0.02 million tons of supporting reagents has been partially completed, including mass production lines for ArF and KrF photoresists with an annual output of 300/400 tons; the company's Jiangsu semiconductor chip polishing pad production base is under construction, and the project can achieve an annual output of 0.25 million advanced semiconductor chip polishing pads after delivery, and annual sales are expected to be about 0.8 billion yuan after full production.

There are many customers for rubber additives, and demand is rising steadily. The company is the world's largest supplier of special materials for tires, and the production and sale of high-performance phenolic resin products for tires is in a leading position in the industry. The company has established long-term and stable business cooperation with domestic and foreign tire companies. Customers cover the world's top 75 tire companies, including internationally renowned tire companies such as Bridgestone, Michelin, Goodyear, Ma Brand, and Pirelli, as well as domestic companies such as Zhongce Rubber, Sailun Tire, Linglong Tire, Triangle Tire, and Pulin Chengshan. The global tire market has maintained a steady growth trend. On the one hand, it stems from the further recovery of the global automobile industry chain, leading to an increase in demand for supporting equipment; on the other hand, huge car ownership is also driving up demand in the tire replacement market. The company's high-purity “p-tert-butylphenol” is one of the most important suppliers in Asia. Major customers include Mitsubishi Gas, LG, Teijin, Wanhua, and Covestro.

Profit forecast and valuation: Optimistic about continued production capacity investment and domestic replacement of electronic chemicals. The company is expected to achieve net profit of 0.477/0.602/0.726 billion yuan in 2024/2025/2026, corresponding to PE of about 41/33/28 times, respectively. Covered for the first time, it is covered for the first time, giving it a “buy” rating.

Risk warning: Downstream demand falls short of expectations, performance forecasts and valuations fall short of expectations.