Incident: On July 12, the company released a performance forecast. It is estimated that 23H1 will achieve net profit of 22.9-2.50 billion yuan, an increase of 693.5%-765.3% over the previous year; achieve deduction of non-net profit of 2.26-2.47 billion yuan, an increase of 682.2%-753.0% over the previous year. It is expected to achieve a median net profit of 1.57 billion yuan in the second quarter alone, up 683% year on year and up 92% month on month.
The source of high-purity quartz ore is guaranteed, and profit elasticity continues to be unleashed. 1) Sales volume: It is estimated that external sales volume exceeded 10,000 tons during the reporting period, which is basically the same from month to month. It is expected that the 60,000-ton high-purity quartz sand project planned by the company will gradually be put into operation at 23H2, and sales are expected to continue to rise. 2) Price: The average price continued to rise month-on-month during the reporting period. According to the official website of the 2023 Quartz Conference, the current prices of domestic, medium, and outer sand (mainstream prices) are 34-370,000/ton, 299-320,000 yuan/ton, and 120,000 yuan/ton, respectively. We believe that the high-purity quartz sand industry has high barriers in terms of mining sources and purification, strong supply-side constraints, the boom cycle is expected to lengthen, and there is still room for prices to rise. According to the SMM PV Vision official account, the price of high-purity quartz sand rose again on July 11-12, driven by the sharp expansion of production by silicon wafers in July. The price of domestic inner layer sand had reached 420,000 per ton (bulk unit price), and the price of imported sand had reached 600,000/ton (bulk unit price). 3) Unit profit: It is estimated that the net profit of quartz sand tons during the reporting period exceeded 140,000, a sharp increase over Q1. 4) Product structure: The company actively promotes product structure optimization. It is expected that the share of inner layer sand in the company will continue to increase, while the unit price of inner layer sand is higher, which is expected to further increase the company's overall average price. 5) Mining source: The company's quartz ore supply is stable and reserves are sufficient. The company has a wide range of quartz ore sources and stable supply at home and abroad, such as Africa, South America and many parts of the country, and does not depend on imported sources from India. Furthermore, according to the 2022 report that the company's raw material inventory book balance is about 300 million yuan, we estimate that the company's inventory ore can be used for the company's normal operation and production for more than 1 year. At the same time, it is not ruled out that the company's industrial chain will be extended upstream to further guarantee the supply of mineral sources and enhance competitiveness.
Semiconductor quartz materials have maintained a high growth rate, and the optoelectronics business is operating steadily. 1) Semiconductor quartz materials: The company has now passed the certification in the field of TEL diffusion and etching, as well as the LAM etching process. The US material certification has made phased progress. The company is speeding up the construction of 6,000 tons/year electronic projects, which is expected to drive continued growth in the semiconductor business. In addition, the company is actively promoting the optimization of semiconductor quartz material product structures. With continuous technology improvement and scale effects, the profitability of major semiconductor quartz material products is expected to continue to improve. 2) Optoelectronics business: The light source sector is expected to maintain steady growth. In the field of optical fiber, the company has made breakthroughs in core tubes and synthetic quartz liners for high-temperature sintering, and its products have been widely recognized by customers. In the field of optics, the company has quartz coating materials, UV synthetic quartz materials, and infrared quartz materials. Relying on advanced production technology, quality control capabilities and inspection methods, the company's share has further expanded.
Investment suggestion: We raised the net profit of the company from 23-25 to 66.1/106.6/13.15 billion (the original profit forecast for 23-25 was 42.0/71.4/9.88 billion), mainly considering that the price of high-purity quartz sand is expected to continue to rise, raising the average price assumption for tons of high-purity quartz sand. The adjusted profit forecast corresponds to the current stock price PE of 5.8/3.6/2.9 times. Considering the high prosperity of the high-purity quartz sand business, the company's sales volume continues to rise, and semiconductor quartz materials are expected to continue to expand and maintain the “increase in holdings” rating.
Risk warning: demand falls short of expectations; new industry capacity exceeds expectations; company capacity investment falls short of expectations; risk of technological change; sharp rise in raw material prices.