This report is read as follows:
The company's 2017Q3 performance slightly exceeded expectations, fund-raising and production can be completed ahead of schedule is the main factor, superimposed rapid expansion of new production lines and downstream demand is not reduced, we believe that profit growth will continue to maintain the "overweight" rating.
Main points of investment:
The profit growth rate of the third quarterly report exceeded the upper limit of the performance forecast, slightly exceeding expectations, raising the target price to 84.68 yuan and maintaining the "overweight" rating. The construction of the diamond cutting line production line was completed ahead of schedule, making the 17-year effective weighted production capacity beyond previous expectations. Driven by the outbreak of downstream photovoltaic polysilicon demand, it is expected that the pace of production expansion will be accelerated and the production capacity will expand rapidly. The annual return net profit in 17-18-19 is forecast to be 0.65 million RMB, corresponding to eps 1.25 (+ 0.07) / 2.08 (+ 0.12) / 3.18 (+ 0.53). Considering that the market demand for the diamond line is gradually increasing, and with reference to the valuation of comparable companies, the target price is raised to 84.68 yuan.
The fund-raising project was completed ahead of schedule, and the growth rate of production expansion continued. Q3 revenue is 74.72 million yuan (+ 59.14%), net profit is 21.68 million yuan (+ 71.00%), revenue in the first three quarters is 164 million yuan (+ 46.22%), net profit is 40.89 million yuan (+ 55.26%), which is slightly higher than our previous forecast based on investment capacity. It is speculated that the production capacity is put into operation in advance. Performance growth factors include (1) photovoltaic polysilicon cutting is rapidly popularizing the diamond line process, demand explosive growth, the emergence of a pattern in short supply; (2) the release of production capacity, greatly increase the output and sales of the diamond line; (3) the company's timely expansion of production capacity of the diamond line, it is expected that the new scale will not be less than the scale of the investment.
We believe that with the increase of the production line, the revenue and profit of the fourth quarter will exceed the data of the third quarter, thus raising the profit forecast for the whole year.
The demand of polysilicon diamond wire cutting is not reduced. The production expansion cycle of the Kumgang line equipment is relatively short, and the main restraining factors are the venue and training personnel. The construction and rental of the second phase of the plant will solve the site restrictions.
It is expected that the demand in the lower reaches will be in short supply until the end of the 18th, while the diamond line is a relatively high-end precision diamond tool, and the gross profit margin is expected to remain at a high level.
Catalyst: the new production line reaches production, and the tangent line of polysilicon is popular.
Risk hint: photovoltaic subsidies decline, Kumgang line unit price decline.