I. Incident Overview
On August 9, 2021, the company released its semi-annual report. It achieved operating income of 1,203 million yuan in the first half of the year, an increase of 45.01% over the previous year; it achieved net profit of 168 million yuan, an increase of 52.25% over the previous year. Among them, Q2 achieved operating income of 640 million yuan, an increase of 13.63% over the previous month, and achieved net profit of 100 million yuan to the mother, an increase of 46.37% over the previous month.
II. Analysis and Judgment
Downstream demand has expanded dramatically, and the four major sectors have gone hand in hand
In 2021 H1, the company's screen display materials sector benefited from increased downstream demand brought about by domestic substitution and a sharp increase in photoresist business for new product panels, achieving revenue of 607 million yuan, an increase of 56.77% over the previous year, gross profit margin of 43.32%, a year-on-year increase of 2.40 pct; the semiconductor materials sector achieved revenue of 256 million yuan, an increase of 37.13% over the previous year, and a gross profit margin of 38.39%; the UV curing materials sector achieved revenue of 240 million yuan, an increase of 32.63% year on year, gross profit margin of 31.32%, mainly due to downstream demand Growth and the impact of the expansion of the plastic surface-treated functional materials business; organic synthetic pharmaceutical intermediate products were affected by strong market demand and achieved revenue of 99 million yuan, an increase of 42.97% over the previous year
The domestic substitution process accelerated. The company's screen display materials fully benefited in the first half of the year. The company's screen display materials sector accounted for 50.48% of revenue, which greatly boosted the company's overall performance. The company's products are mainly used in the liquid crystal display industry, including mixed crystal materials for liquid crystal displays and photoresist products. Currently, China's liquid crystal display industry's material import substitution is in a period of rapid growth. Due to fierce competition, international manufacturers have gradually withdrawn from LCD panel production capacity, and China's LCD production capacity has risen from 3% in 2005 to 50% of the world's total production capacity in 2020. The compound growth rate of LCD panel production capacity in the next three years is about 3.10%, and the compound growth rate of the LCD demand side is about 6.50%, and the “120t/a TFT-LCD hybrid liquid crystal display material project” invested by the company is progressing steadily. With the further increase in the company's production capacity, the market share and revenue of the company's screen display materials business will improve greatly.
The company's product structure continues to improve, and competitiveness continues to improve
The company has leading domestic technology in all major business segments. In the first half of 2021, the company's 5000t/ATFT-LCD photoresist project provided stable supply to customers, the production capacity of the 5500t/a synthetic new materials project and the 100t/a high-performance optoelectronic new material purification project increased steadily, and some production lines of the integrated circuit packaging materials base have also been put into operation. The base will further expand the company's production capacity in the semiconductor packaging materials business, thereby enhancing the company's competitiveness. Guided by China's “double gigabit” strategy, optical fiber production increased 5.9% year-on-year in June this year, reaching 140.46 million cores per kilometer. After the completion of the company's 10,000 tons/year UV-curing optical fiber coating material expansion project, the company continued to expand its voice in this field. In addition, the company's “120 tons/year TFT-LCD hybrid liquid crystal display material project”, “150 tons/year TFT-LCD synthetic liquid crystal display material project” and “15 tons/year OLED terminal display material sublimation purification project” are progressing steadily. As various projects under construction continue to be implemented, the company's product structure continues to be upgraded, and performance will continue to grow.
III. Investment Suggestions
All business segments of the company have good market development prospects and economic benefits. A number of new projects are progressing steadily. At the same time, they have benefited from the acceleration of domestic substitution of panel materials, and are optimistic about the company's future growth. The company's earnings per share from 2021 to 2023 are expected to be 0.61, 0.74, and 0.90 yuan respectively. The corresponding PE is 35, 29, and 24 times, respectively. Referring to the CS electronic chemicals sector, the current PE is 85 times that of PE, maintaining the “recommended” rating.
4. Risk Reminder:
The progress of new projects fell short of expectations; downstream demand fell short of expectations; the scale of the company expanded rapidly, and production capacity not released in a timely manner was converted into benefits