Event: on the evening of August 15, the company issued a semi-annual performance forecast for 2022. In the first half of 2022, the company achieved revenue of 943 million yuan, an increase of 9.25% over the same period last year; net profit of 82.81 million yuan, down 28.09%; and net profit of 80.41 million yuan, an increase of 46.06% over the same period last year. In 2022, Q2, the company achieved a revenue of 492 million yuan per quarter, an increase of 6.92% over the same period last year, an increase of 9.27% over the same period last year, and a net profit of 50.84 million yuan per quarter, down 44.82% from the same period last year and an increase of 59.04% over the same period last year. Achieve a net profit of 46.78 million yuan per quarter, an increase of 37.07% over the same period last year and 39.12% over the previous year.

Comments:

With the volume of high-purity chemicals, the operating performance of 22H1 is growing at a high speed compared with the same period last year. Benefiting from the further accelerated introduction of the company's electronic-grade hydrogen peroxide, ammonia and other original products, superimposed by the gradual expansion of the new production capacity of 30,000 tons of high-purity electronic-grade sulfuric acid built in 2021, 2022H1's high-purity chemical business ushered in a simultaneous increase in volume and price. The revenue of 2022H1's high-purity chemicals business reached 216 million yuan, a substantial increase of 53.7% over the same period last year. At the same time, due to the volume of high-margin electronic-grade sulfuric acid products, the gross profit margin of 22H1's high-purity chemicals business increased 6.17pct compared with the same period last year. In terms of photoresist and supporting materials business, the company's overall revenue remained relatively stable. 22H1 achieved revenue of 137 million yuan, an increase of 3.84% over the same period last year, and its gross profit margin increased 4.71pct over the same period last year. In terms of lithium battery materials business, the company achieved revenue of 251 million yuan, down 17.1% from the same period last year. In addition, according to iFinD data, the average domestic sulphuric acid price of 22H1 increased by about 106.9% year-on-year, benefiting from a 23.0% year-on-year increase in revenue from other business sectors of 22H1 (mainly industrial-grade sulfuric acid products). In addition, it should be noted that the year-on-year decline in the company's return net profit is mainly due to the large amount of fair value change profit and loss related to Mensong International (about 54.49 million yuan) in the first half of 2021. From the perspective of pure operating performance, although the main production base of 2022Q2 and the eastern China where the company's main customers are located have been affected by the COVID-19 epidemic, the overall operating data of the company still shows a relatively rapid growth.

"Semiconductor + new energy" double efforts, continue to expand product capacity. In terms of high-purity chemicals, in 2021, on the basis of the original electronic-grade hydrogen peroxide, ammonia and other high-purity chemicals, the company further added 30,000 tons / year of G5 high-purity sulfuric acid production capacity. At present, the company has a production capacity of 60,000 tons / year of high-purity electronic sulfuric acid, which is expected to be completed and put into production in the first half of 2023. In addition, the company's Jingrui (Hubei) Microelectronic Materials Co., Ltd. (currently 35%) has an annual output of 105000 tons of electronic-grade microelectronic materials project (phase I) has been officially put into production in July 2022. In terms of photoresist, the KrF lithography machine purchased by the company in July 2022 was successfully transferred to the company's laboratory, and the production and testing line of KrF photoresist has been basically completed. The resolution of the company's KrF photoresist products has reached the technical requirements of 0.25 ~ 0.13 μ m, and has passed the tests of some important customers. The company will strive to achieve mass supply of KrF photoresist within this year. At the same time, the company has expanded the production capacity of 1000 tons / year photoresist intermediates and 1200 tons / year photoresist in Meishan base in Sichuan, which is expected to be completed and put into production in October 2022. In terms of new energy materials, based on the original 25,000 tons / year NMP capacity, the company further plans and constructs 20,000 tons of γ-butyrolactone (GBL, the precursor of NMP), 100000 tons of electronic grade NMP, 20,000 tons of NMP recycling and 10,000 tons of conductive plasma project, which has been officially started on August 15.

Earnings forecast, valuation and rating: benefiting from the rise in volume and price of the high-purity chemicals business, 22H1 still achieved significant operating performance growth in the adverse situation affected by the epidemic in East China, slightly exceeding previous expectations.

At the same time, further considering the incremental performance brought by the gradual release of the company's related production capacity, we raise the company's profit forecast for 2022-2024. It is estimated that the company's homing net profit from 2022 to 2024 is 2.02 (up 20.2%) / 2.90 (up 12.0%) / 3.90 (up 8.6%) respectively. As the industry leader in the field of wet electronic chemicals in China, the company continues to expand product production capacity, and is expected to maintain rapid growth and maintain the company's "buy" rating in the future.

Risk tips: production capacity construction is not as expected, product and raw material prices fluctuate, downstream demand is lower than expected, product verification risk, product research and development risk, industry competition risk.