SQM(SH:688138) Shenwan Hongyuan Securities·2025-06-26 11:25Investment Rating - The report initiates coverage with an "Accumulate" rating for the company [1][7]. Core Views - The company specializes in photomasks used in the electronic component manufacturing process, with a strong focus on both flat panel display and semiconductor photomasks. The company has experienced stable annual growth of over 20% in revenue [4][19]. - The flat panel display photomask market is projected to grow, with China expected to account for over 50% of the global market share due to its significant production capacity [51][52]. - The semiconductor photomask market presents substantial growth opportunities, with the company actively expanding its production capabilities for advanced process nodes [6][74]. Summary by Sections 1. Company Overview - The company primarily produces photomasks, which are essential for the photolithography process in electronic component manufacturing. Its main products include quartz photomasks and soda-lime photomasks, with quartz masks being used for high-precision applications [19][28]. - The revenue from flat panel display photomasks is expected to remain dominant, accounting for 77.2% of total revenue in 2024, while the share of semiconductor photomasks is gradually increasing [4][33]. 2. Flat Panel Display Market - The global market for flat panel display photomasks is approximately 6.9 billion RMB, with China projected to hold a market share exceeding 50% due to its leading position in panel production [51][52]. - The demand for photomasks is driven by the ongoing evolution of display technologies, including larger screen sizes and higher resolutions, which require advanced photomask solutions [59][68]. 3. Semiconductor Market - The semiconductor photomask market in China is valued at around 12.9 billion RMB, with a low domestic production rate of less than 10% [74]. - The company is investing in a new production facility in Foshan to enhance its capabilities in producing advanced photomasks for nodes ranging from 130nm to 28nm [6][74]. 4. Financial Forecast and Valuation - The company is expected to achieve revenues of 14.2 billion RMB in 2025, with a growth rate of 28.0%, and a net profit of 2.5 billion RMB, reflecting a year-on-year increase of 45.2% [5][7]. - The projected price-to-earnings (PE) ratio for 2025 is 37.9, indicating a potential upside of 13.0% from the current valuation [7].