\u3000\u3 Shengda Resources Co.Ltd(000603) 650 Red Avenue New Materials Group Co.Ltd(603650) )
Event: Red Avenue New Materials Group Co.Ltd(603650) announced that it plans to purchase 33.005% equity of Beixu electronics from Shanghai Zhengfang chemical with self raised funds of 197 million yuan. After the acquisition, the company will hold 81.14% equity of Beixu electronics, and Beixu Electronics will be included in the consolidated statement scope of the company.
Comments: as the largest local supplier of positive liquid crystal photoresist, Beixu electronics achieved a revenue of 260 million yuan in 2021, a year-on-year increase of 22.7%, a year-on-year increase of 21% in photoresist sales, and a market share of about 19% in China. Beixu Qianjiang factory has an annual production capacity of 6000 tons of positive photoresist, which was officially put into operation in January this year. At present, the production capacity transfer of all positive photoresist products of Beixu (Beijing) has been completed, and the market has been gradually expanded to improve the production capacity. At present, the high-performance new products of the company’s panel photoresist have a positive verification effect in BOE. It is expected to achieve mass production and sales in 2022, and further increase the proportion of downstream major customers.
Red Avenue New Materials Group Co.Ltd(603650) plans to purchase 12% equity of Suzhou jucui held by Jiangsu Jicui with 15.6 million yuan in cash. Suzhou jucui was founded by technical experts from American Akron polymer systems (APS) and Chinese experts in the field of display materials, relying on the platform of Jiangsu Industrial Technology Research Institute. It is mainly engaged in high-performance electronic chemicals such as polyimide and organic film materials required by the new display industry, and has rich experience in PI resin synthesis, doping and modification. PI materials and Red Avenue New Materials Group Co.Ltd(603650) existing panel photoresist business have a high degree of synergy at the client. The acquisition of Suzhou jucui equity is another step for Tongcheng to expand its product layout. In the future, the company plans to further expand its layout in the field of PI materials by means of direct or indirect equity purchase and capital increase, and adhere to building a platform electronic material supplier.
The main business of special rubber additives has stabilized and improved, and the core leader of domestic photoresist. The company’s comprehensive gross profit margin in 2022q1 was 25.5%, up 11.0% month on month, and higher than 22.4% in 2021q3. The net profit margin in 2022q1 was 12.6%, up 4.1% month on month. In the first quarter, the price of main raw material phenol still increased month on month, but the shipping price has begun to decline, and the company has the ability to adjust the price to the downstream month by month. The main business of special rubber additives has stabilized and improved. In 2020, there were 1.8 billion customers of 1.8-inch photoresist and 1.8-inch photoresist, with a year-on-year growth of 265.8% for 1.8-inch photoresist and 1.5% for 1.8-inch photoresist lines, respectively. New photoresist products continued to break through, and the profitability of self-produced upstream raw materials increased.
Red Avenue New Materials Group Co.Ltd(603650) at present, the three business lines of electronic materials, degradable materials and automobile / tire special materials have carried out multi category expansion within the professional scope horizontally and vertically integrated the upstream and downstream of the industrial chain, and have preliminarily realized the strategy of new material platform. Based on its core technology, the company has opened up the whole chain of upstream and downstream development and cooperated with the integration of team, direction, technology and resources. So far, in addition, the company continues to expand production and the gradual release of production capacity will bring important growth support to the company. We expect that the company will realize a net profit attributable to the parent company of RMB 4.0/6.1/930 million in 2022, 2023 and 2024 respectively, corresponding to the current valuation of 40.6/27.0/17.5x, maintaining the “buy” rating.
Risk tip: the progress of new product R & D and customer introduction is less than expected, and the downstream demand is less than expected.
