Dynamic event
The company released its financial report for the first three quarters of 2017, with operating income of 163 million yuan, an increase of 46.22% over the same period last year, and a net profit of 40.9 million yuan, an increase of 55.26% over the same period last year.
Comments on matters
The profitability of 2017Q3 has greatly increased. The company's 2017Q3 realized operating income of 74.73 million yuan, an increase of 50.96% over the previous month, and a net profit of 21.67 million yuan, an increase of 107.97% over the previous month. Gross profit margin in the first three quarters of 2017 was 47.15 per cent, up 1.73 per cent from 2017H1. The company's revenue and net profit increased significantly in the third quarter, and we judged that the company's annual production capacity of 1 million km electroplated diamond line investment project was released rapidly, resulting in a rapid increase in revenue. In addition, we judge that with the substantial expansion of the company's production capacity, the company has ushered in the scale effect, the decline in the cost of the company's electroplating diamond line is expected to cover the rate of decline in prices, and the company's gross profit margin has stabilized and rebounded.
The company's customers cover major photovoltaic enterprises, and continuous production expansion is expected to usher in scale effects. The company has a full range of electroplated diamond lines, including wire diameter 0.06mm-0.45mm products. The company's downstream customers cover Jiangsu Xiexin, Jinglong Group, Longji shares, Central shares and other mainstream photovoltaic enterprises.
We believe that with the strong demand downstream, the company's production capacity will continue to expand. The company's projects under construction in the third quarter: 11.09 million yuan and cash paid for the purchase and construction of fixed assets, intangible assets and other long-term assets: 58.47 million yuan all remain high, which proves from the side that the company's production capacity will continue to expand.
Photovoltaic installation still maintains a high economy, and distribution has become a new driving force for growth. According to the data of China Power Union, the newly installed 2017Q1-3 photovoltaic is 42.31GW, while the new installed capacity is 4.03GW in September, which is higher than expected. Photovoltaic installation continues to maintain a high economy and is expected to exceed 50GW for the whole year. Distributed new installed 15GW was added from January to September 2017, an increase of more than 300% over the same period last year. Distributed installed 7.11GW was added in the first half of the year, and distributed installed was 7.89GW in June-September. Distributed installation has become a new driving force for growth in the second half of the year. Based on the expectation of future subsidy decline, distributed installation will still be rushed in the future.
Polysilicon diamond line transformation does not wait for time, the diamond line production capacity gap is obvious. Under the pressure of monocrystalline silicon production capacity, polysilicon enterprises led by Poly Xiexin are very urgent for the transformation of polysilicon wafers. Poly Xiexin expects that the output of diamond wire-cut silicon wafers will account for more than 90% by the end of 2017. From an industry-wide point of view, the proportion of polycrystalline rigid lines may exceed 60% in 2017 and is expected to reach 100% in 2018. Based on the above assumptions, we estimate that the demand for photovoltaic diamond lines from 2017 to 2020 will be 2351, 3887, 4184 and 44.4 million km, up 87.53%, 65.3%, 7.66% and 6.1% over the same period last year. We have counted the production capacity planning of the Kumgang line of mainstream enterprises, totaling 30.14 million km. Even in the most optimistic case, these capacity are all invested and reached production, and the capacity gap is still obvious. The demand for the diamond line is concentrated in 2017-2018, whether these capacity is put into production in time there are problems, existing enterprises will fully benefit.
Investment advice. Based on the three-quarter report, we fine-tune the company's profit forecast and forecast that the company's sales revenue in 2017, 2018 and 2019 will be 2.51,3.81 and 487 million yuan. The net profit belonging to the parent company is 6107, 8577 and 108.93 million yuan, the EPS is 1.17,1.65,2.09 yuan, and the corresponding PE is 66.3,47.2,37.2 times. Maintain the company's "cautiously overweight" rating.
Risk hint. The progress of the transformation of polysilicon diamond wire is not as expected.
