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Finance Associated Press, October 7th (Reporter Fang Yanbo) Naura Technology Group (603360.SH) is taking further steps towards cross-border investments in the semiconductor industry.

Tonight, Dalian Bio-Chem announced that its wholly-owned subsidiary Xin'AoHua plans to inject 0.7 billion yuan into Suzhou Xinhuilian Semiconductor Technology Co., Ltd. (referred to as "Xinhuilian"), increasing its direct ownership to 46.6667% after the capital increase and accepting a vote entrustment for 7.9675% of Xinhuilian's equity, totaling control of 54.6342% of its voting rights. At the same time, the company also decided to inject no more than RMB 0.1 billion into Xinhuilian X Semiconductor Technology Co., Ltd. (referred to as Xinhuilian X) that was spun off from Xinhuilian.

Dalian Bio-Chem stated that this transaction will help improve the company's layout in the semiconductor industry and enhance its comprehensive competitiveness and profitability by meeting the strategic planning and development needs of the semiconductor business. After the completion of the transaction, Xinhuilian will be consolidated into the company's financial statements, and it is expected that the company's asset size and revenue will be moderately enhanced.

As a leading producer of benzothiazole ketone industrial fungicides for nearly 20 years, Dalian Bio-Chem has an annual production capacity of over 0.04 million tons of active pharmaceutical ingredients, making it the largest producer in Asia of benzothiazole ketone industrial fungicide active pharmaceutical ingredients.

In recent years, due to factors such as the macroeconomic situation, intensified market competition, and environmental changes, Dalian Bio-Chem's performance has been stagnant. Especially this year, further decline in product prices has once again eroded the company's profitability, making it urgent to find new growth drivers. The burgeoning semiconductor industry has caught the attention of Dalian Bio-Chem at this critical moment.

At the beginning of this year, Dalian Bio-Chem signed a strategic cooperation agreement with Suzhou Xinhuilian Semiconductor Technology Co., Ltd., and entrusted Xinhuilian with the purchase of semiconductor equipment using its own funds, with a total contract amount not exceeding 0.14 billion yuan. Xinhuilian is responsible for re-manufacturing, upgrading, providing technical services, and external sales of the equipment.

In April this year, Dalian Bio-Chem announced its plan to establish a wholly-owned subsidiary with self-owned or self-raised funds of 0.5 billion yuan, and use it as the operation platform for the company's semiconductor business.

Dalian Bio-Chem's optimism towards the semiconductor industry is not unfounded. This year, the demand for domestic downstream customers for key semiconductor equipment to be 'localized' has been increasing. Domestic chip manufacturers are paying more attention to promoting the localization of the supply chain and cultivating local suppliers, leading to rapid development of domestic semiconductor equipment. Among the related listed companies, Naura Technology Group (002371.SZ), and Shengmei Shanghai (688082.SH) achieved nearly 50% revenue growth in the first half of this year.

Public information shows that Xinhui Lian has been dedicated to the research and development of automation equipment for semiconductor production lines since 2019, with core team members having years of experience in semiconductor photolithography equipment business. In recent years, while fully utilizing its photolithography equipment supply channels to develop photolithography equipment remanufacturing business, the company has also commercialized wafer transfer equipment such as sorters and front-end modules used in semiconductor production lines, and has secured contract orders and intent orders from multiple downstream customers.

As of now, Xinhui Lian has a total of 0.298 billion yuan in hand orders, with an expected growth in full-year revenue in 2024 exceeding 177% compared to 2023.

The company has stated that in the future, automation equipment for semiconductor production lines and integrated services will be the key focus of Xinhui Lian's future development. With the support of many bullish policies in China's semiconductor industry, and against the backdrop of industrial upgrading transformation from low-end to mid-to-high-end, the huge demand in China's chip end consumer market and the broad market prospects for corresponding line equipment technological upgrades.

Xinhui Lian's management shareholders and original actual controllers have committed in the investment agreement that from 2024 to 2026, Xinhui Lian's net income will not be less than 0.1 billion yuan, 0.15 billion yuan, and 2.5 billion yuan respectively, with a total net income not less than 0.5 billion yuan.