Core views

The company released its 2022 annual report and the first quarter report of 2023. The company's growth was steady in 22 years, and the share of revenue in the semiconductor sector increased rapidly. The company's first-quarter performance was under pressure due to the decline in the price of the raw material trimethylamine, which led to a decline in the price of the company's products, compounded by a high base in the first quarter of '22. Looking ahead to the second quarter, the operating rate of panel manufacturers is expected to increase rapidly, and company demand is expected to recover. Companies in the semiconductor field successfully introduced Chengdu Yisiwei Integrated Circuit Co., Ltd. to develop quantitative performance. Currently, leading domestic chip companies are collaborating with leading domestic chip companies to carry out large-scale graphical imaging liquid product development and industrial application verification for integrated circuits. It is in the full-production line testing stage. Successful subsequent verification is expected to bring significant performance increases to the company.

occurrences

The company published its annual report for '22 and a quarterly report for '23

The company achieved operating income of 848 million yuan in 2022, +8.72% year on year, net profit of 163 million yuan, +16.26% year on year, gross profit margin 30.23%, +2.75pct year on year, net interest rate 19.28%, and +1.25pct year on year. In the revenue structure, semiconductor and other revenue reached 207 million yuan, +162.48% year on year, accounting for 24.44% of revenue, +14.32pct year on year. Looking at the quarter alone, 2022Q4 achieved operating income of 205 million yuan, -17.15% year on year, net profit of 24 million yuan, -38.53% year on year, gross profit margin 30.75% year on year, +2.16pct year on year, net interest rate 11.79% year on year, -4.10pct year on year. The net profit decline in the fourth quarter alone was mostly due to asset impairment of 207.119 million yuan.

The company achieved operating income of 161 million yuan in 2023Q1, -33.23% year on year, net profit of 28 million yuan, -29.36% year on year, gross profit margin 32.19%, +5.65 pct year on year, net interest rate 17.28%, and +0.95pct year on year.

Brief review

The decline in raw material prices has led to a reduction in product prices, and the company's performance is under pressure. The company's raw materials mainly include trimethylamine, dimethyl carbonate and packaging barrels. Among them, the average purchase price of trimethylamine in 2022 reached 15,596.05 yuan/ton, +69.71% over the same period last year. Affected by this, the price of the company's products rose from 8.01/kg yuan in '21 to 9.96 yuan/kg in '22, an increase of 24.34%. According to data from Yingfu Baichuan, the price of trimethylamine (pure product) began to decline rapidly in December 22. On March 31, the price of trimethylamine (pure product) was 6100 yuan/ton. The corresponding company's price of trimethylamine (pure product) was 6100 yuan/ton. The purchase price was 8,724.93 yuan/ton, -50.94% over the same period last year. The price of the company's products also dropped to 9.03 yuan/kg, -12.84% year on year.

At the same time as product prices declined, the company's 23Q1 production and sales volumes were 16,250.97 and 17,111.37 tons respectively. Since 22Q1 was around the high of the previous panel cycle, the base was high. The two data were -31.78% year-on-year and -23.86%, respectively. Entering the second quarter, with a recovery in demand and a decrease in the base, the company's sales are expected to improve significantly.

An upward reversal in demand in the panel cycle can be expected. According to Cinno Research data, with the arrival of the peak promotional season in the middle of the year, there was a cyclical recovery in stocking demand from major TV brands. LCD TV panel prices rose across the board in March, and the increase is expected to continue until at least June. Omdia's “Display Production and Inventory Tracking Report” shows that benefiting from a surge in LCD TV, laptop, display panel and smartphone LCD panel orders, the total capacity utilization rate of global display panel manufacturers is recovering from 66% in the first quarter of 2023 to 74% in the second quarter. The company's main products, such as imaging liquid, are consumables in the panel production process, which are directly linked to the operating rate of panel factories. Demand is expected to recover significantly in the second quarter.

Semiconductors created the next growth curve, and the multi-category layout enriched the revenue structure. The company's semiconductor imaging solution has been successfully tested and successfully imported into Chengdu Yisiwei Integrated Circuit Co., Ltd., which has achieved quantitative supply results. At the same time, the company undertook projects such as the Ministry of Industry and Information Technology, the Ministry of Science and Technology, and Zhejiang Province's 2022 “Lingyan” R&D research plan to promote domestic replacement of imaging liquid in the semiconductor field. Currently, it is collaborating with leading domestic chip companies to carry out the development and industrial application verification of graphical imaging liquid products for large-scale integrated circuits. It is in the full-production testing stage. Successful subsequent verification is expected to bring significant performance increases to the company. Furthermore, the company's photoresist remover, BOE etching solution, and solvent diluent have all achieved quantitative supply results, which is expected to further enrich the company's revenue sources.

Profit forecast: The company's net profit for 2023-2024 is expected to be 218 million yuan and 298 million yuan respectively, maintaining the “buy” rating.

Risk warning: The recovery of the boom in the panel industry falls short of expectations, the expansion of the semiconductor sector falls short of expectations, and the recovery of the panel industry's prosperity falls short of expectations: about 90% of the company's revenue currently comes from the panel industry, which is greatly influenced by the boom in the panel industry. The decline in sentiment in the panel industry has continued for a long time. Recently, from the perspective of operating rates, product prices, etc., the downward trend in the industry has stabilized to a certain extent, but since many factors such as the Russian-Ukrainian war and inflation continue, expectations of the global economic recession are also rising, and the demand side will maintain a weak trend in the future. Also, expectations are that the operating rate of panel manufacturers has declined, It will have a great adverse impact on the company's performance. The company's capacity utilization rate declined quarterly in the first three quarters of '22 due to panel customers lowering the operating rate, and the capacity utilization rate fell to 69.75% in Q3 2022. The current profit forecast assumes that the capacity utilization rate in 2023 gradually increases to 70% (considering new production capacity). There is still a distance from the 86.63% capacity utilization rate in the first quarter of '22. The estimates are relatively conservative, but if the panel industry's operating rate falls short of expectations, it will put a lot of pressure on the company's capacity utilization rate.

The expansion of the semiconductor field fell short of expectations: the company has been expanding in the IC field for a long time. Currently, it is in the production line verification stage. The company's technical strength and market position in the imaging liquid market are outstanding, but if problems occur in product upgrade development, production line verification, mass production capacity, etc., the company's expansion in the semiconductor field may fall short of expectations.