Key investment points

On November 29, 2024, the company announced that PSPI photoresists have entered the small-batch mass production stage.

It successfully broke the monopoly of American and Japanese companies, and realized that PSPI photoresist mass production companies formed two major product segments around the two key process links in the semiconductor manufacturing and packaging process of electronic electroplating and lithography, and formed two major product segments: electroplating solutions, supporting reagents, photoresists, and supporting reagents. In terms of photoresists and supporting reagents, the company focuses on specialty process photoresists and implements differentiated and high-end development strategies. At present, the company's self-developed positive PSPI products have received the first order from leading wafer companies. This is Positive PSPI's first domestic material order in a mainstream fab, and it is a landmark in localization.

Photosensitive polyimide (PSPI) is a type of polymer material that combines heat resistance and photosensitivity. It also has electrical insulation and can protect semiconductor circuits from physical and chemical conditions. Compared with traditional non-photosensitive PI, since PSPI itself has excellent photosensitive properties, there is no need to apply photoresist that only acts as a working medium during use, which can greatly shorten the process and improve production efficiency. Currently, it is widely used in passivation protective layers for wafers, insulating high temperature protective layers for power devices and IGBTs, alpha ray shielding materials, etc., and plays a key role in the application reliability of devices. Currently, PSPI's technology and market are mainly controlled and monopolized by American and Japanese companies. According to GlobaInfo Research data, the global PSPI market size is USD 0.528 billion in 2023, expected to reach USD 2.032 billion in 2029, and a CAGR of 25.16% from 2023 to 2029.

After several years of hard work, Eisen has made breakthroughs in various aspects such as raw material structure design, resin synthesis and purification, and formulation synergy research, and has successfully developed a number of polymerization process control and batch stability control technologies. A total of 23 invention patents have been applied for related technologies. At the same time, the company is also actively deploying negative PSPI, low-temperature crosslinked PSPI, ultra-high sensitivity PSPI, and PI-like materials. It is expected that material certification work will be completed within a few years and mass production will enter the mass production stage.

The company's advanced packaging negative photoresist products are in a leading position in China, and is currently the only supplier that can achieve mass production in China. Currently, negative photoresists for advanced packaging are progressing according to plan in Shenghe Crystal's microtesting and certification, and customer film verification is in progress.

The acquisition of INOFINE has consolidated its leading position in wet electronic chemicals, and has now obtained relevant certificates. In terms of electroplating solutions and supporting reagents, the company has gradually achieved breakthroughs in advanced packaging and advanced 28nm and 14nm wafer manufacturing processes on the basis of continuing to consolidate its leading position in traditional packaging in China. The company plans to use its own capital of 14 million ringgit and 80% of INOFine's shares. After the transaction is completed, INOFINE will become a holding subsidiary of the company and will be included in the scope of the company's consolidated statements. Established in 2009, INOFINE is the earliest semiconductor wet electronic chemicals business in Malaysia. This merger and acquisition is an important strategic move to quickly lay out the Southeast Asian market and accelerate the pace of internationalization, and will further consolidate the company's leading position in the field of wet electronic chemicals. At present, the company has obtained the “Overseas Investment Certificate” issued by the Jiangsu Provincial Department of Commerce and the “Overseas Investment Project Filing Notice” issued by the Kunshan Development and Reform Commission.

Revenue in the 24Q3 advanced packaging sector increased significantly. The gross margin increased year-on-month, thanks to the company's significant year-on-month increase in sales revenue in the advanced packaging field. 24Q3 achieved revenue of 0.126 billion yuan, up 34.70% year on year, up 21.70% month on month; net profit to mother was 10.0907 million yuan, up 36.03% year on year, up 61.99% month on month; net profit without return to mother was 8.774 million yuan, up 24.74% year on month, month on month. 90.86%; gross profit margin was 28.25%, up 0.60 percentage points year on year and 4.56 percentage points month on month.

Investment advice: In view of the reduction in gross margin due to changes in the company's product structure in the first half of the year, we adjusted our original profit forecast for 2024. From 2024 to 2026, the company's revenue is expected to be 0.46/0.562/0.675 billion, respectively, with growth rates of 27.8%/22.2%/20.0%; net profit to mother of 0.046/0.073/0.101 billion yuan (the original forecast value for 2024 was 0.053 billion yuan), with growth rates of 41.9%/57.2%/37.9%, respectively; PE was 88.4/56.2/40.8, respectively. The company is deeply involved in the field of materials with a low localization rate, and the acquisition of INOFINE strengthens its leading position in wet electronic chemicals, focuses on photoresists with characteristic processes, and implements a differentiated and high-end development strategy. Continue to recommend and maintain an “gain” rating.

Risk warning: Downstream terminal market demand falls short of expectations; risk that new technologies, new processes, and new products cannot be industrialized as scheduled; risk that market competition increases risk; risk that capacity expansion progress falls short of expectations; systemic risks, etc.