Brief performance review

On April 17, 2023, the company disclosed its quarterly report. The first quarter of 2023 achieved revenue of 570 million yuan, an increase of 7.6% over the previous year; the net profit of the mother was 100 million yuan, a year-on-year decrease of 32.8%.

Management analysis

The decline in the price of silicon series products affected the company's performance, and the volume and price of potassium series products rose sharply. Judging from the business situation of the company's various products in the first quarter, the sales volume of silicon series products increased 3.1% year on year to 21,000 tons, but sales revenue fell 22.3% year on year. The main reason was the decline in the price of hydrogen chloride in silicon series products, which caused the average sales price of silicon series products in the first quarter to fall 24.7% year on year, further affecting the profitability of this sector; the performance of potassium series products was relatively good, with sales up 19.2% year on year to 35,000 tons, while the average sales price increased 7.9% year on year.

Demand was supported by the arrival of the peak period for new production capacity for polysilicon, and the price spread for hydrogen chloride improved at the same time. In the context of dual carbon, domestic polysilicon companies have seized the opportunity to expand rapidly. Currently, domestic polysilicon production capacity has been announced by more than 4 million tons. Some projects planned to be put into operation last year have been delayed due to factors such as the epidemic and construction work. It is expected that the production capacity of polysilicon to be put into operation this year will be at least one million tons, which will form a strong support for demand for photovoltaic-grade hydrochlorosilicon. Judging from the pace at which new polysilicon production capacity was put into operation, demand increased relatively much in the second quarter of this year. Considering the limited increase in production capacity of photovoltaic-grade hydrochlorosilicon, it is expected that prices will rise after demand recovers. According to Baichuan data, the average price of normal grade and photovoltaic grade of hydrochlorosilicon in the first quarter of this year was 70,000 yuan/ton and 17,000 yuan/ton respectively. Currently, the price of ordinary grade products has risen to 90,000 yuan/ton, and the price of photovoltaic grade products has risen to 171,000 yuan/ton. At the same time, upstream raw material prices are still fluctuating at a low level. As subsequent product prices rebound, the profitability of hydrochlorosilicon is expected to rise simultaneously.

Profit Forecasts, Valuations, and Ratings

The company has put into operation many new projects this year. While the industrial layout continues to be rich, the product structure is also gradually transforming to the high-end. At the same time, the advantages of the integrated layout of the industrial chain will be further strengthened. Considering that the price of the core product trichlorosilane has declined since this year, and that the production capacity of the silane coupling agent project has been released relatively slowly, the company's 2023-2025 net profit forecast for 2023-2025 was lowered to 660 million yuan (-21%), 880 million yuan (-16%), and 10.8 billion (-5%) yuan. The current market capitalization corresponding to PE valuation is 14.39/10.79/8.79 times, respectively, maintaining the “increase” rating.

Risk warning

The commissioning of new projects fell short of expectations, product prices fell, raw material prices rose, polysilicon production capacity fell short of expectations, demand for construction delivery, etc., declined, and directors' and supervisors reduced their holdings