According to the announcement of the company's pre-performance in 202, we estimate that its 2022Q4 net profit will increase significantly by 286.38% to 383.88% compared with the same period last year, exceeding market expectations, mainly due to the accelerated frequency of price increases in the fourth quarter and further optimization of the product structure. We expect this trend to continue in 2023, maintaining the company's "buy" rating.
The company expects performance growth of 248.06% to 284.72% in 2022. The company announced a pre-increase in performance in 2022, which is expected to achieve a net profit of 978 million yuan to 1.081 billion yuan, an increase of 248.06% to 284.72% over the same period last year, mainly due to the rapid growth of demand in downstream photovoltaic, semiconductor and other industries. The company's operating performance has achieved rapid growth. According to its 2022 performance pre-increase announcement, we estimate that the company's 2022Q4 homing net profit is expected to be 408 to 511 million yuan, a substantial increase of 286.38% and 383.88% over the same period last year, exceeding market expectations.
The production and sales of photovoltaic high-purity sand continue to grow, prices continue to rise and the structure of high-end products is further optimized. In the third quarter of 2022, due to the technical transformation of the old production line and the superimposed power supply of the new production line, the capacity utilization rate did not reach 100% in the third quarter, and the capacity is expected to be basically full in the fourth quarter, and the production and sales of photovoltaic high-purity sand continue to grow month-on-month. In terms of price, with the further growth of demand downstream of silicon production in the fourth quarter, the gap between supply and demand in the industry continues to enlarge, the company's price increase frequency has also accelerated, and the cumulative price increase is further expanded compared with the third quarter. In addition, considering the judgment that the production capacity of imported sand with better 2022Q4 quality is basically full, it is expected that the increase in demand will further increase the proportion of sales of middle and inner sand of quartz shares, while the sales price of middle and inner sand is significantly higher than that of outer sand, thus driving up the average price of photovoltaic high purity sand in the company as a whole.
It is expected that the market competition for high-quality quartz sand will be more intense in 2023. The trend of large size crucible puts forward higher requirements for the quality of high purity sand, such as bubble, purity and consistency. Under the condition that the expansion of imported sand is not as expected, the gap of sand layer in 2023 may be further enlarged, or the production quality of large size quartz crucible in 2023 will be restricted to a certain extent, while high quality quartz sand will have a great impact on the secondary cost and product quality of silicon wafer production. Downstream enterprises may increase the competition for high quality high purity sand. Even if the price of high-purity quartz sand doubles again, considering the price reduction of silicon material, it is expected to account for only 4% of the cost of silicon wafers, which has little impact on wafer profits. At the same time, quartz shares in domestic sand have the leading advantage in the production of inner sand, and the proportion of middle and inner sand sales of quartz shares is expected to further increase in 2023.
Risk factors: the demand for photovoltaic and semiconductors is lower than expected; the progress of the company's new production capacity is not as expected; and competition on the supply side of the industry is intensified.
Profit forecast, valuation and rating: considering the expectation of more shortage of high purity sand and optimization of product structure in the coming year, the company's cost-side control is excellent. We maintain the company's EPS forecast of 2.78 EPS in 2022-2024, taking into account the company's 2022-2024 performance is expected to achieve an average annual compound growth rate of more than 40%, and Oujing Technology, which is both upstream and downstream of the industrial chain, has an PE valuation of more than 25x in 2023. However, quartz shares as upstream resource products, profits are more volatile, so give a certain valuation discount, we give the company 2023 PE 25x, maintain the target price of 190 yuan, maintain the company's "buy" rating.