Description of the event
Annual and quarterly reports show that in 2022, the company achieved revenue of 23.66 billion yuan (+10.6% year-on-year), net profit attributable of 5.15 billion yuan (-374% year-on-year), net profit of 5.06 billion yuan (-38.2% year-on-year); achieved revenue of 5.73 billion yuan in the first quarter of 2023 (-10.3% yoy, +6,4% month-on-month), attributable net profit of 1.0 billion yuan (-51.1% yoy, +68.8% month-on-month), deducting net profit of 960 million yuan (+68.4% year-on-year). It is proposed to distribute a cash dividend of 8.8 yuan (tax included) for every 10 shares to all shareholders.
Incident comments
The decline in the industrial silicon and silicone boom in 2022 dragged down performance. Industrial silicon: In 2022, domestic industrial silicon supply and demand were booming. Both production, sales and prices increased, but raw materials passively dragged down profits. According to operating data, the company's industrial silicon production and sales volume in 2022 were 96.0 and 584,000 tons, +21.5% and +9.4%, respectively; the average price of industrial silicon was 17,584 yuan/ton, +5.4% year on year;
The purchase prices of raw materials ore, petroleum coke, silicon plant coal, and power plant coal were +14.3%, +51.0%, +35.3%, and +26.2%, respectively; the gross margin of industrial silicon was 36.3%, or -12.9pct year-on-year. Silicone: In 2022, the domestic silicone industry added a lot of new production capacity, and industries such as terminal real estate were sluggish, and the boom declined from a high level. According to operating data, the company's silicone production and sales increased significantly in 2022, but prices declined markedly. The average sales prices of cyclic silicone, 107 raw rubber, 110 raw rubber, and mixed rubber were -19.7%, -25.5%, -30.8%, and -18.6%, respectively. The decline in product prices led to a sharp decline in profit.
Entering 2023, the impact of the epidemic gradually dissipated, superimposed production capacity was gradually released, and the company's production and sales increased dramatically. In 2023Q1, the production of industrial silicon, 107 raw rubber, and cyclic siloxane was 34.7, 6.6, 1.18 million tons, +35,9%, +15,4%, +0.7%, respectively, and sales were 18.1, 5.9, and 23,000 tons, +32.6%, +3.1%, +30.0% month-on-month; in addition, the purchase prices of raw ore, petroleum coke, silicon plant coal, and power plant coal were reduced by a combination of -7.7%, 21.1%, 1.4%, and -11.0% year-on-month, and sales growth fell sharply month-on-month. improvements. At present, the industrial silicon industry is very profitable. Silicone has fallen below the industry's cost line, and there is limited room for downside. After the exhibition, photovoltaics, real estate, and macroeconomic recovery are expected to bring about a recovery in the economy
Accelerate the layout and extension of the industrial chain, pointing to the “leader in photovoltaic integration.” The company is actively expanding the downstream industry around industrial silicon. It plans to invest 17.63 billion yuan to build the “Eastern Hesheng High Purity Silicon Project with an annual output of 200,000 tons”, plans to invest 20.50 billion yuan and 4.46 billion yuan to build the “Central Hesheng 20 GW photovoltaic module project”, the “Central Hesheng PV Glass Project with an annual output of 1.5 million tons”, and increase capital to Chubu Hesheng by 5.5 billion yuan. As an extension of the company's industrial chain, the polysilicon and photovoltaic module project conforms to industry trends and will further improve the company's overall silicon-based materials industry chain layout and create new profit growth points.
The silicon carbide project has made a breakthrough, and new silicon-based materials have blossomed more and more. In terms of silicon carbide, the company has fully mastered the core process technology of the entire industry chain, such as raw composite product growth, village bottom processing, and chip epitaxial, breaking through the technical barriers of key materials (porous graphite coated materials) and equipment. It already has mass production capacity, yield is at the leading level of domestic enterprises, and key technical indicators have caught up with international leaders. The 6-inch substrate and epitaxial have been verified by many domestic downstream customers. 8-inch substrates and epitaxial products have been successfully developed, and sample output has been achieved: In addition, the company's high-end silicone downstream product development technology is progressing in an orderly manner. Breakthroughs in high-end silicon-based materials such as silicon carbide have built a strong technological moat and consolidated the company's leading position in global silicon-based materials;
The company is a global leader in silicon-based materials. The cost advantage of industrial silicon is outstanding. The layout of Yunnan Hesheng's hydroelectric silicon integration project, Dushan Duopin silicon, one cell, one module, one photovoltaic power generation integration project, and the semiconductor silicon carbide project opens up room for future growth. It is estimated that the company's net profit attributable to the company in 2023-2025 will be 573, 73.4 and 9.83 billion yuan respectively, maintaining the “purchase” rating.
Risk warning
1. Project construction fell short of expectations
2. Macroeconomic performance fell short of expectations.