Build a "glass + natural gas" collaborative model, and constantly improve their own cost advantages. Ancai Energy, a subsidiary, operates the "West-to-East Gas Transmission" branch line in northern Henan, with a designed gas transmission capacity of 1 billion cubic meters per year, while supplying its own glass business as fuel, especially after the completion of the Yuji pipeline, it is expected that the proportion of pipeline natural gas for self-use will increase to more than 50%, and the advantage of low fuel cost in glass business will be further highlighted. The company signed an agreement to purchase mineral rights with an annual production capacity of 100000 tons of quartz sand and reserves of 1.234 million tons. In December, the company announced a total annual production capacity of 750000 tons of silicon-based material projects in Anyang, Jiaozuo and Xuchang glass production bases, which are mainly used for processing purchased quartz sand ores, and provide ultra-white quartz sand for glass furnaces to reduce the extra cost of purchasing ultra-white quartz sand in Anhui and other places. The company also plans in the aspects of strategic procurement of soda ash, optimization of personnel structure and improvement of production line production scale, so as to reduce the production cost of glass business and reduce the gap of gross profit margin with the head enterprise.

Photovoltaic + photothermal glass capacity release, out of the differential competition route. Establish the "one nuclear quadrupole" development strategy, photovoltaic + photothermal glass plate as the focus of management. In the photovoltaic glass business, in April 2022, Xuchang and Jiaozuo photovoltaic glass production bases were ignited one after another, and the daily melting volume of the original photovoltaic glass 1800t/d was added, and the overall production capacity ranked among the top five in the industry. The new line production capacity is mainly 2.0mm ultra-thin glass. In June / December, the company signed a large photovoltaic glass order of 2.539 billion yuan with Jingao Technology / TCL Central (price estimate). The landing of two large orders will guarantee the steady growth of the company's revenue side in the next three years. The follow-up company plans to increase the daily melting production line by an average of 1200 tons per year during the 14th five-year Plan period. In 2021, the acquisition of photothermal technology, subsidiary 600T/D 's ultra-white float glass + photothermal glass original and building energy-saving deep processing production line 21Q1, the added value of the products is higher than that of ordinary float glass. The company breaks the barrier of photothermal glass supply of Asahi nitrite, and has reached cooperation with domestic 100MW photothermal power generation projects, and is organizing the first batch of photothermal glass order production and delivery, during the 14th five-year Plan period, each province requires the proportion of wind and thermal project allocation and storage, photothermal power station is more stable and low-cost than electrochemical energy storage in more than 25 years life cycle, and shipments of photothermal glass products are expected to improve in the future.

Invest in the pharmaceutical glass to create a new product structure, and invest downstream to strengthen the coordination of the industrial chain. In 2022, the company announced that it will invest 380 million yuan to build a neutral borosilicate glass furnace pipe drawing project in long'an District, Anyang City, Henan Province. The designed daily melting capacity of the first / second phase of the kiln is 25 tons per day, and the first phase production capacity is expected to be ignited and put into production in the first quarter of 2023. In addition to self-construction, the company selects local mergers and acquisitions of high-quality projects in Henan, plans to build medium boron-silicon glass tube production base group, new kiln standard foreign medium-boron-silicon tube drawing technology, to enhance the proportion of glass tube supply from domestic manufacturers. At the same time, the company plans to divest Ancai gas and natural gas trading business, and invest with downstream solar glass manufacturers to build an annual production project of 20,000 sets of sunglasses and transmission components for photothermal power stations, so as to further optimize its product structure and complete business transformation.

Silicon material / silicon wafer down to the ground, photovoltaic glass and other auxiliary materials are expected to rise in volume and price. According to Zhuochuang, the price of photovoltaic glass decreased slightly in early December 2022, and fell in the short term due to the slowdown in photovoltaic installation growth at the end of the year. The price of silicon material and wafer has been falling continuously since December 2022. Before that, the profits of the component factory were compressed by the high cost of upstream silicon material and wafer. After the silicon material price reduction is implemented, the profit of the industrial chain is expected to be redistributed. Although according to our calculations, the photovoltaic glass industry is expected to enter a situation of excessive supply in 2023, but considering the high demand for ultra-thin glass in the lower reaches of the industry chain, at the same time, the reduction in the upstream cost of the photovoltaic industry chain will effectively release the downstream installation demand. We are still optimistic that photovoltaic glass (especially the ultra-thin glass below 2.0mm) will increase in volume and price in 2023.

Investment suggestion: considering the contribution of revenue and profit from the 23-year new production line, we give the company a forecast of 22-24 net profit of 2.25 / 360, 422 million yuan, corresponding to EPS 0.26, 0.42, 0.49, PE valuation 25.96, 16.26, 13.85 times, considering 2023 float and photovoltaic glass price elasticity, based on 2023 EPS 20 times PE, target price 8.4 For the first time, coverage gives a "buy" rating.

Risk hint: the capacity of photovoltaic glass industry expanded more than expected, the price of raw fuel rose higher than expected, the progress of production capacity construction of the company's pharmaceutical glass project was lower than expected, and the market expansion of photothermal glass was not as expected. The epidemic affects follow-up production and construction or transportation and logistics activities.