The company released its three-quarter report for 2024. In the first three quarters of 2024, it achieved revenue of 4.999 billion yuan, up 41.15% year on year; realized net profit of 0.749 billion yuan, up 55.80% year on year; of these, 24Q3 achieved revenue of 1.743 billion yuan, up 42.93% year on year, up 6.35% month on month; achieved net profit of 0.229 billion yuan, up 64.64% year on year, down 16.23% month on month. I am optimistic that the company's electronic materials business will continue to develop, the LNG sheet business will enter the harvest period, and maintain the purchase rating.

Key points to support ratings

The company's performance grew steadily during the first three quarters of 2024. The company's revenue and net profit to mother both achieved year-on-year growth in the first three quarters of 2024, mainly due to increased revenue from the electronic materials and LNG sectors. The company's gross margin for the first three quarters of 2024 was 32.88% (+1.02 pct year on year), the net margin was 15.07% (+0.89 pct year on year), and the period expense ratio was 13.68% (+0.23 pct year on year), of which the financial expense ratio was 0.23% (+1.42 pct year over year), mainly due to the increase in loan interest this year. The 24Q3 company's revenue increased month-on-month, with net profit attributable to mother rising and falling month-on-month, gross profit margin of 30.50% (-0.20 pct, -7.28 pct month-on-month), and net profit margin of 12.81% (+0.08 pct year over year, -4.28 pct month-on-month). The month-on-month decline in profitability was mainly due to cost side effects.

The downstream utilization rate increased, and the company's electronic materials sector continued to develop. According to the three quarterly reports of various wafer foundries and Jibang Consulting information, under the influence of new products such as mobile phones and laptops driving supply chain preparation demand in the second half of 2024 and the trend of localization production, the capacity utilization rate of China's wafer foundry is picking up quarter by quarter in 2024, and the capacity utilization rate has reached a high level, and the semiconductor industry is gradually recovering. In terms of electronic materials, according to the interim report, 24H1's precursors have achieved full coverage of major domestic storage and logic chip manufacturers, and its market share has further increased. Jiangsu Xianke products such as HCDS, TMA, and TiCl4 have been certified and supplied, and localization of some raw materials for precursors has progressed; businesses such as electronic specialty gas, silicon powder, and LDS equipment have benefited from increased prosperity in the semiconductor industry, and performance is growing steadily. Furthermore, as downstream domestic display panel production capacity continues to expand, demand for upstream materials continues to rise. According to the interim report, 24H1 Jiangsu Xianke photoresist passed the audit and on-site audit by Huaxing Optoelectronics, Huike, BOE, etc., mass production and delivery of multiple products, and successful verification of high-end products such as RGB materials for CMOS sensors, low-temperature RGB materials for OLEDs, and i-Line photoresists for advanced packaging RDL layers.

Orders for LNG insulation panels continue to be fulfilled. Benefiting from the booming development of 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. According to the interim report, 24H1 obtained GTT certification for reinforced polyurethane foam materials based on the fourth-generation green and environmentally friendly foaming agent HFO, while the key materials for the company's RSB and FSB secondary shielding layers have been mass-produced on a small scale. The company continues to supply insulation sheets for more than 10 large LNG carriers and fuel tanks built by Hudong Zhonghua Shipbuilding (Group) Co., Ltd., Jiangnan Shipbuilding Co., Ltd., and Dalian Heavy Industries. The company's first NO96 Super+ large LNG carrier to supply sheets was delivered and put into use. In addition, China's first 0.175 million cubic MarkII/Flex LNG carrier supplied by the company will also be delivered within the year. In the future, as downstream shipyard business continues to develop and demand for LNG storage and transportation continues to rise, the company's orders are expected to continue to be fulfilled.

valuations

Considering that the semiconductor industry is still recovering, compounding the company's cost-side impact and lowering the profit forecast, it is estimated that the company's earnings per share for 2024-2026 will be 1.97 yuan, 2.64 yuan, and 3.51 yuan, respectively, and the corresponding PE will be 33.7 times, 25.2 times, and 19.0 times, respectively. I am optimistic that the company's electronic materials business will continue to develop, the LNG sheet business will enter the harvest period, and maintain the purchase rating.

The main risks faced by ratings

R&D progress falls short of expectations, semiconductor market fluctuations, and the risk of large exchange rate fluctuations.