Guosheng Securities: Tongcheng new materials integrated two wings, three major business endogenous extension to create new materials platform enterprises

With two wings and two-wheel drive, the endogenesis and extension of the three major businesses are developing at a high speed. Founded in 1999, the company is currently engaged in three major businesses: special materials for automobiles / tires, electronic materials and biodegradable materials. The company started with the trade of special materials for tires and extended to upstream material manufacturing, and has become the world's largest supplier of special phenolic resin for tire rubber, with customers covering the top 75 tire enterprises in the world. Kehua Microelectronics and Beixu Electronics were acquired successively in 2020. Kehua, as the only Chinese photoresist company listed by SEMI in the top eight of all-ball photoresist, is also the only manufacturer in China that can supply KrF photoresist in bulk to local 8-inch and 12-inch wafer factories. Beixu Electronics TFT positive photoresist occupies more than 40% share in JD.com. In terms of biodegradable materials, in 2020, the company cooperated with BASF in China with an annual capacity of 100000 tons of biodegradable materials project, the layout of biodegradable materials commanding heights.

Panel + IC photoresist: domestic alternative space is huge, downstream demand is growing rapidly. In the global photoresist market, whether panel or IC photoresist, Japan has always been the core supplier. From the perspective of the current Chinese market, the panel industry is gradually developing in the direction of high-generation line and OLED, the continuous growth of semi-conductor wafer foundry capacity, the continuous improvement of semiconductor process and other dimensions directly promote the continuous improvement of photoresist consumption and value. Tongcheng New material is currently working with Beixu and Kehua layout panel + IC photoresist to open the door of domestic alternatives, and actively expand the annual production capacity of 11000 tons of photoresist under Tongcheng Electronics, so as to make full preparations for China's rapidly growing demand for photoresist.

Join hands with BASF to lay out the biodegradable plastics market. Since 2020, the state has continuously launched relevant policies to promote the treatment of plastic pollution, and the development of degradable plastics is imperative. It is estimated that by the end of 2025, only the demand for degradable plastics in takeout, express delivery and agricultural film will reach 1.545 million tons, corresponding to a market size of about 27 billion yuan, compared with the current market demand of 42000 tons, there is huge room for growth. The company has established cooperation with well-known takeout, Shangchao and express packaging companies at home and abroad, and plans to invest 670 million yuan in the project of 100000 tons / year biodegradable materials. Based on the advanced PBAT polymerization technology authorized by PBAT inventor and global chemical leader BASF, the company is most expected to benefit from the huge demand in the plastic market under the background of stricter environmental protection.

The advantage of resin synthesis was copied to the photoresist track, and the acquisition of Kehua and Beixu opened a new journey in the field of electronic chemicals. Resin is the main raw material of photoresist, and the cost accounts for more than 50%. Electronic-grade phenolic resin requires very high product purity, which is more difficult to synthesize than in traditional application fields. The company has 20 years of phenolic resin R & D and production experience, successfully developed electronic-grade phenolic resin, and joined hands with Kehua Beixu to form coordination in raw material supply and product research and development to promote the localization of photoresist. Profit forecast and investment advice: with the gradual formation of the company's integrated two-wing business layout, we are expected to see the gradual realization of the company's panel and IC photoresist, as well as biodegradable materials business, to achieve a double boost to the company's revenue and profits. In addition, the company focuses on the extension of the upstream and downstream of materials all the year round, and has a unique understanding and accumulation in the field of materials, realizing the integration of the upstream and downstream of the industrial chain. this is also the fundamental reason for the company as the most powerful back support to enter the new material industry, and the fundamental reason for supporting the company's high gross profit margin over the years, and this advantage has also been further copied to the "wings". Therefore, we expect that from 2021 to 2023, the company will achieve revenue of 2835,3450 and 4.16 billion yuan, and net profit of 5.47, 703, 939 million, corresponding to the previous valuation of 47.7, 37.1, and 27.8x, with a "buy" rating for the first time.

Risk hint: downstream demand is not as expected and technology research and development is not as expected.