The booming development of integrated circuits has driven the demand for electronic specialty gases to rise. 1) The global market size of electronic special gases continues to grow, and the growth rate of Chinese electronic special gases is significantly higher than that of the world. According to TECHCET data, the global electronic specialty gas market size is expected to increase to USD6.023bn in 2025, with a compound growth rate of 7.33% from 2021 to 2025. It is expected that the domestic electronic gas market size will increase to RMB31.66bn in 2025, with a compound growth rate of 12.77% from 2021 to 2025. Integrated circuits and display panels jointly create two core needs for electronic specialty gases. 2) Nitrogen trifluoride and tungsten hexafluoride are the most widely used electronic specialty gases in the world, and there will be a supply gap. The market size in 2021 were US$880 million and US$335 million respectively, accounting for 20% and 8% of the total size of the electronic special gas market. It is expected that the world will face a supply gap in 2025.

China has introduced multiple sets of industrial policies to support the accelerated localization of electronic specialty gases. The competition in the electronic gas market is fierce. Overseas giants dominate the global market. There is an urgent need for localization of the electronic special gas industry. At present, the localization of electronic special gas has achieved initial results, and the materials industry has broad room for future development.

Peric Special Gases (PSG)’s production capacity and technology lead the industry.

PSG has the largest production capacity of nitrogen trifluoride and tungsten hexafluoride in China. Its nitrogen trifluoride production capacity was 9,250 tons, and tungsten hexafluoride production capacity was 2,230 tons. The production capacity of both products ranks first in China and second in the world. PSG is the first domestic supplier of electronic special gases to enter the 5nm process.

PSG has a wide customer coverage and is deeply recognized by downstream customers. PSG's customers have covered major domestic wafer manufacturing companies such as SMIC, Yangtze Memory, Shanghai Huahong, and Changxin Memory, and have entered global markets such as TSMC, UMC, Hynix, Kioxia, GlobalFoundries, and Texas Instruments. In the field of display panels, PSG has become an important supplier to domestic and foreign companies such as BOE, TCL Technology, Tianma Microelectronics, Xianyang Caihong, Visionox, Innolux, LGD, SDP and so forth.

Earnings Forecast & Rating: We initiate with the BUY rating, and expect that PSG’s net profit will be Rmb408/485/579mn in 2023/2024/2025 respectively, with corresponding P/E at 44.17/36.97/31.20x respectively, considering that PSG’s continued expansion of production capacity.

Risks: Ineffective product promotion, fluctuation in product prices, fluctuation of macroeconomic.