Main points of investment
Event: the company released three quarterly reports, with revenue of 164 million yuan in the first three quarters of 2017, an increase of 46.2% over the same period last year, and net profit of 40.898 million yuan, up 55.3% from the same period last year.
The application of diamond line in polysilicon chips is higher than expected, and the industry maintains high magnificent demeanor. More than 80% of the company's revenue is electroplated diamond line products. The downstream applications of this product are mainly photovoltaic and sapphire industry, in which photovoltaic industry accounts for more than 85% of the demand. In photovoltaic silicon wafer slices, the single crystal has been completely replaced by electroplated diamond wire cutting in 2016, and since 2017, with the continuous maturity of black silicon superimposed diamond wire technology, the permeability of electroplated diamond wire in the field of polysilicon slices continues to increase, greatly exceeding market expectations, and the industry maintains a high magnanimity.
The production capacity of the company's Kumgang line continues to climb up the slope and continues to exceed expectations. Under the good industry background, the company continues to expand its production capacity after the funds raised by IPO are in place, and has completed the capacity expansion of the 1 million km electroplating diamond line of the IPO investment project ahead of schedule in the third quarter. The follow-up company will continue to expand production capacity, increase market share, and grasp the market boom cycle.
Revenue rose sharply in the third quarter, with single-quarter results exceeding those of the first half of the year. Under the combined effect of the continuous expansion of the company's production capacity and strong downstream demand, the company achieved revenue of 74.729 million in the third quarter and achieved a performance of 21.677 million, which exceeded the performance of the first half of the year. As the company's production capacity climbed, the company's gross profit margin increased from 45.4% in half a year to 47.2%, which to a certain extent confirmed the continuous improvement of the company's product quality rate. The net operating cash flow of the company in the first three quarters is 53.457 million, which is 1.3 times of the company's performance.
Profit forecast and investment advice. We estimate that the EPS of the company from 2017 to 2019 will be 1.31,2.45,2.97 yuan respectively, and the corresponding PE will be 56 times, 30 times and 25 times respectively, and the compound growth rate of net profit will be 59.7% in the next three years. In view of the current prosperity of the industry and the acceleration of the company's capacity expansion, the company will be valued 33 times in 2018, corresponding to the target price of 80.85 yuan, adjusted to "increase holding" rating.
Risk tips: 1) the risk that the company's product development progress is not up to expectations; 2) the policy fluctuation risk; 3) the downstream customer development is not up to the expected risk.