\u3000\u3 Shengda Resources Co.Ltd(000603) 650 Red Avenue New Materials Group Co.Ltd(603650) )
Event: on May 18, 2022, the company announced that Tongcheng electronics, a Red Avenue New Materials Group Co.Ltd(603650) wholly-owned subsidiary, plans to purchase 330050% equity of Beixu electronics from Zhengfang chemical for RMB 197 million. After this acquisition, Beixu Electronics will be included in the scope of the company’s consolidated statements and changed from a joint-stock company to a holding subsidiary.
Beixu electronic panel photoresist production capacity expansion helps the company improve the photoresist product line. Beixu electronics is the first local manufacturer of tft-lcdarray photoresist in Chinese Mainland and the largest local supplier of liquid crystal positive photoresist in China. In 2021, Beixu electronic panel photoresist achieved a sales revenue of 256 million yuan, a year-on-year increase of 22.7%, the sales volume of photoresist products increased by 21% year-on-year, and the Chinese market share was about 19%, ranking the second largest supplier in China. Beixu electronics accounted for more than 45% of BOE and actively promoted in other panel enterprises. Beixu Qianjiang factory has been officially put into operation in January 2022. It has completed the production capacity transfer of all positive photoresist products and gradually expanded the production capacity. After all of them are completed, it can realize the annual supply demand of 6000 tons of positive photoresist materials, which will improve the market share of the company’s products and enhance the company’s profitability, comprehensive competitiveness and sustainable development ability.
Acquire the equity of Suzhou jucui materials and layout the panel photoresist industry chain. On April 30, 2022, Red Avenue New Materials Group Co.Ltd(603650) signed an equity transfer agreement with Jiangsu Jicui intelligent liquid crystal technology Co., Ltd. and purchased 12% equity of Suzhou jucui with its own funds, with a total transaction amount of RMB 15.6 million. Suzhou jucui is founded by the technical experts of Akron polymer systems and Chinese display materials experts relying on the platform of Jiangsu Industrial Technology Research Institute. Its main business is polyimide and other high-performance electronic chemicals and organic film materials required by the new display industry. It has leading proprietary technology and R & D and production force in the field of PI materials, and has rich experience in the synthesis, doping and modification of PI resin. After the acquisition, Red Avenue New Materials Group Co.Ltd(603650) will combine its own customer advantages and Suzhou jucui’s professional advantages, give full play to the internal synergy, further improve the layout of display materials and promote the localization process.
The whole line of business is ready to go, and the release of production capacity can be expected to increase. In terms of traditional automobile rubber business, the price of raw materials is at a high level and the freight rate is rising, and the cost side of the company is increasing. The company reached a consensus with customers and conducted price transmission on a monthly basis to reduce the upward pressure on upstream raw materials and freight. In terms of IC photoresist business, the growth rate of China’s demand for IC photoresist continues to increase. At the same time, the international leading photoresist manufacturers began to reduce production, and the demand gap continues to expand. Chinese IC photoresist suppliers ushered in new opportunities for domestic substitution. In terms of panel photoresist business, the subsidiary Beixu electronics is the main manufacturer. At present, the construction of its new factory has been completed and all of it has been put into operation in 22q1. At the same time, the factory changed production smoothly and the output increased continuously. In terms of biodegradable materials business, due to the impact of the epidemic, the construction progress of the plant is blocked, and the construction is expected to be postponed to June to July. The policy is favorable in 2022. Meanwhile, the conflict between Russia and Ukraine has led to the reduction of production in European producing areas, which helps the release of the company’s production capacity.
Investment suggestion: it is estimated that the net profit attributable to the parent company from 2022 to 2024 will be 500 / 718 / 920 million yuan, and the current market value corresponds to 34 / 24 / 18 times of PE. The company’s capacity continues to expand, the customer verification is good, the long-term growth can be expected, and the “recommended” rating is maintained.
Risk warning: price fluctuation of raw materials; Production capacity construction is less than expected; Market competition intensifies.
