Incidents:
The company's revenue in 2022 was 4.14 billion yuan, +23.0% year on year, net profit of 80 million yuan, -63.2% year on year; gross profit margin was 12.1%, a year-on-year decrease of 3.3pct. The company's revenue for the 22Q4 quarter was 1.36 billion yuan in a single quarter, +57.3% year on year, net profit of -26 million yuan, -726.9% year on year, gross profit margin 11.4%, down 1.2 pct from the previous year.
The company's revenue has soared, and profits are under pressure in the short term. The revenue of photovoltaic glass in '22 was 2.010 billion yuan, +52.3% year on year, and gross margin was 16.8%, a year-on-year decrease of 8.6 pct. The price of a single flat was 21.1 yuan, a year-on-year decrease of 20.0%, and the gross profit of a single flat was 3.5 yuan, a year-on-year decrease of 47.0%. There are many factors in the decline in the company's performance in 2022: ① The supply cycle of photovoltaic glass is strong (kilns are generally continuous production, and it is expensive to re-bake the kiln once the kiln is stopped), the mismatch between the supply and demand of photovoltaic glass in '22 caused the price of photovoltaic glass to drop 7.5% year-on-year; ② Profit space was squeezed by upstream raw materials such as heavy soda ash and high gas prices; ③ Shanghai Xingui failed to deliver precious metals as agreed. In November 22, the company initially determined that the asset needed to be reduced by 23.39 million yuan; ④ plus the company's Xuchang/Jiaozuo base reached successive production bases. Accounts receivable year-on-year There was an increase of 175.3%, and bad debts were calculated at 36.48 million yuan. However, 92.8% of accounts for accounts for at least one year, and the risk that future accounts receivable and bad debt accruals will continue to grow is relatively small, and the company's profitability is expected to be repaired.
The production capacity of traditional photovoltaics and novel medicinal and photothermal glass has been steadily released. The company is actively deploying upstream raw fuels, and it is expected that corresponding costs will be reduced in the future. In April '22, the photovoltaic glass kilns at the company's Jiaozuo and Xuchang bases ignited. At the end of '22, the daily melting volume of the company's photovoltaic glass increased from 900 t/d to 2,700 t/d. The kiln production lines all have the capacity to produce large-sized, ultra-thin photovoltaic glass, which is in line with future glass industry trends. In addition, the company has also launched a neutral borosilicate pharmaceutical glass project with an annual output of 10,000 tons. The project is being constructed in two phases. The first phase, with a production capacity of 5,000 tons, is expected to be put into operation at 23H1. The company also reached cooperation with the domestic 100MW photothermal power generation project. The first batch of photothermal glass orders was signed in December '22, and production is currently being organized. The technical barriers to photothermal glass are high. Currently, only Asahi Glass and Assai have mass production capacity domestically. In the future, with the increase in high-margin photothermal glass orders, the gross profit of the float glass business is expected to improve. Relying on the operation of CNPC's West-East Gas Pipeline to Yubei and the Sinopec Yuji Pipeline under construction, the company has gradually built an industry-leading “glass+natural gas” collaborative development model. The company actively lays out upstream quartz minerals. The company acquired Zhengqinghe Mining and obtained a production capacity of 100,000 tons/year of quartzite ore. Additionally, the company is developing silicon-based material projects in Anyang, Jiaozuo and Xuchang, which will achieve 750,000 tons of low-iron quartz sand after production starts in September 23. The company lays out upstream raw fuels, which is expected to guarantee supply and calm the risk of price fluctuations.
Investment advice: The company is a traditional glass case leader, and the glass manufacturing field is quite well established. Looking at the industry level, the high boom in downstream photovoltaic installations combined with the rapid increase in the penetration rate of double glass modules is rapidly increasing, and demand and unit profit for photovoltaic glass are expected to be repaired. We expect the company's net profit to be 1.8/28/320 million yuan respectively in 23-25 (the forecast for 23/24 was 37/560 million yuan before return to the mother. The main reason for the decline in performance was high upstream raw material prices, which lowered gross margin and corresponding performance forecasts). The year-on-year increases were 138%/49%/15% respectively, and the corresponding PE was 35.4/23.7/20.6 respectively.
Due to various factors, the company's performance in '22 was under short-term pressure. Entering April, future upstream raw material costs (such as natural gas, soda ash) are expected to drop rapidly. Furthermore, the company's rapid release of photovoltaic glass production capacity+increased self-supply ratio of natural gas+active deployment of upstream quartz sand mines. Coupled with the company's layout of high-margin products such as photothermal and medicinal glass, it is expected to catalyze future performance. According to our estimates, PEG was only 0.257 in '23, so it continues to maintain the “buy” rating.
Risk warning events: Competition in the photovoltaic glass industry intensified, the sharp rise in raw fuel prices exceeded expectations, the company's pharmaceutical glass project capacity construction progress fell short of expectations, the photothermal glass market expansion fell short of expectations, and the epidemic affected subsequent production, construction or transportation and logistics activities.