Description of the event
Quartz Co., Ltd. released its first-quarter report, with operating income of 1,223 million yuan, an increase of 371% over the previous year; Guimu's net profit was 821 million yuan, an increase of 840% over the previous year.
Incident comments
Volume and price have risen sharply in 2023Q1. Taking into account the impact of rising production capacity and the impact of the epidemic, we expect 23Q1 sales to experience significant year-on-year growth. More importantly, the price side of quartz sand is the core contribution. It is expected that the consolidated sales price of 23Q1 will experience significant month-on-month and year-on-year increases. At the same time, we judge that the proportion of core varieties in the middle and inner layers is expected to continue to increase. Structural optimization is another support for improving profitability. In the end, the 23Q1 company's performance increased 840% year on year, gross profit margin was 84%, an increase of nearly 30 pcts over the previous year, and an increase of nearly 10 pcts over 22Q4.
The supply side of the mineral source is stable, and as a leader, the company's advantages continue to expand. The current gap between companies and their fellow sand-making enterprises should focus more on the technical side, so the perception of mine reserves and reserves should be based on differences in perceptions of the technical level of large and small enterprises. Based on this, the advantages of companies and small enterprises continue to expand (technical advantages or important carriers of mine reserve advantages). Based on this, under high barrier constraints and continued demand, the ultra-tight pattern of quartz sand in 2023-2024 will not change, and the price will still have high elasticity and strength.
Semiconductors quickly broke the game, and both wings soared. The company has been deeply involved in the industry for many years to increase research and development, and semiconductors have all ushered in major breakthroughs in category expansion and downstream applications. At the same time, the semiconductor quartz materials market has more space. For the company, it is another larger blue ocean market, which is also expected to provide the company with a second growth curve.
High quality racetrack with plenty of room for growth. Further, we believe that the quartz material is a rare “long slope and heavy snow” track. The market space is large, competition barriers are high, and there is sufficient short-term flexibility. 2023 is expected to usher in a four-layer core elasticity of “single product price increase+sales expansion+structural optimization+industry outreach”. Photovoltaic sand provides current elasticity, and long-term semiconductors have ushered in greater growth.
Maintaining the previous view unchanged, quartz shares have a far superior advantage over resource products such as lithium carbonate in terms of track attributes and upstream and downstream patterns.
We believe: 1. Interpreting quartz from the perspective of the past cycle is a significant underestimation of it; 2. Mid-cycle price elasticity, quartz sand may be greater; currently, it may only be in the half-stage; 3. With long-term price stability, quartz sand is likely to be better; 4. The all-round dominance of fundamentals is reflected in the dominance of valuation premiums, which still requires cognitive repair.
We expect results of 4.98.6 billion yuan in 2023-2024, corresponding PE of 8.2 and 4.7 times, purchase ratings.
Risk warning
2. The company's production capacity is progressing slowly.