Main points of investment:

The company released the annual report in 2020 and the quarterly report in 2021: the company realized revenue of 1.011 billion yuan (YoY-24%) in 2020, net profit of 137 million yuan (YoY-45%), net profit of 89 million yuan (YoY-63%) and net inflow of operating cash of 191 million yuan (YoY+24%). The decline in revenue and profit in 2020 is mainly due to the intensification of competition among photoinitiators and the impact of the global epidemic. In order to expand domestic and foreign market sales, the company adopts strategic price reduction. In the first quarter of 2021, the company achieved revenue of 311 million yuan (YoY+31%, QoQ+2%), net profit of 38.24 million yuan (YoY+67%,QoQ+69%), and net profit of 26.22 million yuan after deducting non-return (YoY+86%, QoQ+184%). In the first quarter of 2021, the company's photoinitiator sales increased at home and abroad, product prices stopped falling and stabilized, profits increased significantly compared with, month-on-month, and the performance was in line with expectations.

In 2020, the price of the dose increased and fell, and the profitability bottomed out: the company's photoinitiator sales in 2020 were 17000 tons, an increase of 21% over the same period last year, and the recognition of the company's products by customers and the market continued to improve. Affected by the drop in product prices, the revenue of optical initiator in 2020 was 986 million yuan, down 24% from the same period last year, with a gross profit margin of 25.34% and a decrease of 12.82pct compared with the same period last year. From the point of view of the sales area, the company's export contribution income in 2020 was 465 million yuan, a decrease of 30% compared with the same period last year, and exports accounted for about 46%. The company's domestic sales are expected to be better than exports, mainly due to differences in epidemic control at home and abroad. The company's annual expense rate was 13.85%, a decrease of 0.31pct compared with the same period last year, mainly due to the decrease of 1.18pct due to freight adjustment under the new standards, and the company's R & D expense rate of 5.16%, which still increased 0.19pct compared with the same period last year. The company's annual other income of 10.57 million yuan, investment income of 14.83 million yuan and fair value change profit and loss of 27.12 million yuan constitute the main source of non-recurrent profit and loss of the company. At the same time, the company deducts 11.87 million yuan in credit impairment, which has a certain adverse impact on the current performance. Overall, the company's annual net interest rate in 2020 was 13.48%, a year-on-year decrease of 5.14%, a year-on-year decrease of 12.27%, an increase of 2.63 pct over the same period last year, and a month-on-month increase of 4.83 pct. Profitability bottomed out.

Prices have stopped falling and stabilized, building the whole industry chain of photoinitiators: from the first quarter of 2021, the prices of major photoinitiators have approached the historical bottom level, and prices are expected to stop falling and pick up as the global epidemic is gradually brought under control and demand recovers. As the leader of the photoinitiator industry, the company continues to increase its market share, and its performance is expected to return to the growth track. The company's Inner Mongolia long Riguang initiator is under construction with a production capacity of 62 million and is expected to be put into production in December this year, which will bring increment to the development of the company after the relay in Hunan. At the same time, the company built 10,000 tons of UV resin and 6000 tons of special UV formula products in Binzhou, Shandong Province. The company is actively expanding horizontally to light-cured monomers and resins, while making full use of the full understanding of the properties of raw materials to promote the development of downstream light-cured formula products. in the future, the company will realize the layout of the whole industry chain and expand the incremental market.

The forerunner of the localization of photoresist photoinitiator to enter the electronic chemical market: last year, the company completed the acquisition of Dazheng Information and Dazheng new materials, the former is implementing a special photosensitizer project with an annual output of 600 tons of microelectronic photoresist, the latter is implementing a 1000-ton photoresist project. As the core raw material of photoresist, photosensitizer accounts for more than half of its cost. The market has been controlled by European, American, Japanese and Korean enterprises for a long time, and the demand for localization is urgent. According to the annual report, 600 tons of photosensitizer is expected to be put into production in October this year. The company takes photosensitizer as the origin to open up the photoresist industry chain. With the advancement of the localization process of downstream wafers and photoresist, the clamping position of the company at the end of the core material will bring new development opportunities to the company.

Investment suggestion: combined with the progress of the company's new project, the net profit of the company from 2021 to 2022 is 1.73,224 million yuan (the original value is 1.94 yuan and 270 million yuan), and the net profit of 2023 is forecast to be 286 million yuan.

Risk hint: the demand is not as expected; the progress of the new project is not as expected.