Investment Rating - The investment rating for the company is maintained at "Buy" with a target price of RMB 25.74 [1][4]. Core Insights - The company reported Q3 revenue of RMB 880 million, a year-over-year increase of 15% and a quarter-over-quarter increase of 15.47%. However, the net profit attributable to shareholders was RMB 74.06 million, down 14% year-over-year and down 24% quarter-over-quarter [1]. - The overall gross margin for the first three quarters of 2025 increased by 0.4 percentage points to 36.2%, driven by the favorable conditions in the semiconductor materials sector [2]. - The company has ongoing projects, including a significant breakthrough in semiconductor advanced packaging materials, which could disrupt the market dominated by foreign competitors [3]. Summary by Sections Financial Performance - For the first three quarters of 2025, the company achieved revenue of RMB 2.34 billion, a year-over-year increase of 8%, and a net profit of RMB 290 million, up 41% year-over-year [1]. - The company’s Q3 net profit was below expectations due to increased expenses and reduced asset disposal gains [1]. Industry Position - The semiconductor materials sector is experiencing a sustained uptrend, benefiting from increased demand in various applications, including consumer electronics and optical fiber materials [2]. - The company is advancing its projects, including a new liquid crystal materials mixing and R&D center, which is expected to enhance its capabilities in high-end liquid crystal materials [3]. Profit Forecast and Valuation - The profit forecast for the company is maintained at RMB 374 million, RMB 394 million, and RMB 437 million for the years 2025, 2026, and 2027, respectively, with corresponding EPS of RMB 0.66, RMB 0.70, and RMB 0.77 [4][10]. - The target price is set at RMB 25.74, reflecting a price-to-earnings ratio of 39x for 2025, considering the growth potential of ongoing projects [4].

Core Viewpoint - The company has reported its annual financial results, highlighting its business operations, financial status, and future development plans, with a focus on its core business areas in semiconductor materials, display materials, UV curing materials, and organic synthesis materials [1][5]. Company Overview - The company has expanded its core business from UV curing materials in optical communication to four major areas: semiconductor materials, display materials, UV curing materials, and organic synthesis materials, maintaining a mission to provide high-quality materials for high-tech manufacturing [5][6]. - The company operates over 30 subsidiaries across regions including Japan, Singapore, the United States, and East and South China [5]. Business Segments Semiconductor Materials - The semiconductor materials include photoresists and wet process electronic chemicals used in semiconductor manufacturing and advanced packaging, as well as traditional packaging materials like solder balls and epoxy encapsulants [6]. - The company has developed a complete temporary bonding solution for semiconductor manufacturing, which supports various disassembly methods [6]. Display Materials - Display materials consist of photoresists and liquid crystal materials for TFT-LCD and OLED screens, with a significant focus on developing proprietary technologies [7]. - The company’s subsidiary, Hecheng Display, is a key supplier in the mid-to-high-end TN/STN field and has received multiple technology awards for its innovations [7]. UV Curing Materials - UV curing materials are crucial for fiber optic cable manufacturing and include coatings that protect optical fibers and enhance their mechanical and optical properties [8]. - The company has developed advanced UV curing materials and has received several awards for its innovations in this field [8]. Organic Synthesis Materials - Organic synthesis materials include photoinitiators and pharmaceutical intermediates, with a focus on applications in antiviral drugs and antibiotics [9]. - The company’s innovative photoinitiator TMO has gained recognition and awards for its contributions to human health and industry challenges [9]. Industry Characteristics - The semiconductor materials industry is characterized by a broad application field and high demand dispersion, with no significant industry cyclicality, primarily influenced by macroeconomic trends [10]. - The display materials sector exhibits cyclicality due to its dependence on the economic conditions affecting display device sales, with demand typically peaking in the second half of the year [11]. - The UV curing materials market is closely tied to the economic cycle, with stable growth during economic prosperity and declines during downturns [12]. - Organic synthesis materials have a diverse application landscape, with demand influenced by macroeconomic fluctuations and technological advancements, showing no significant seasonality [12]. Financial Data - The company has not required retrospective adjustments or restatements of previous financial data, indicating stability in its financial reporting [13]. - The company’s major accounting data and financial indicators for the past two years are available, reflecting its operational performance [15]. Important Events - The company has approved a profit distribution plan for 2023, proposing a cash dividend of RMB 0.80 per 10 shares, with no stock dividends or capital reserve transfers [16][17]. - The company has undergone a change in its accounting practices due to regulatory requirements, correcting prior accounting errors and adjusting financial statements accordingly [16]. - The company has decided to sell its wholly-owned subsidiary, Dairui Technology, to ensure continued operational stability amid market pressures [18].