On July 13, Dale issued a half-year performance forecast for 2023: 2023H1 realized a return net profit of 0.86-92 million yuan, an increase of 108 percent over the same period last year; deducting non-net profit of 0.86-92 million yuan, an increase of 109 percent over the same period last year.

Main points of investment

The production capacity of Diamond Line continues to release, and its performance is growing at a high speed.

According to the performance forecast, the company's 2023Q2 is expected to achieve a net profit of RMB 0.65-71 million, an increase of 133-154% over the same period last year and 206-234% over the previous year; the non-net profit of RMB 0.64-70 million was deducted, an increase of 135-157% over the same period last year, and a month-on-month increase of 204%. The rapid growth of the company's performance is mainly due to the continuous release of the production capacity of the Kumgang line since 2022, from 800000 km / month in January to 3 million km / month in December. 2023Q1 Company was affected by many factors, such as Spring Festival, epidemic situation, silicon price fluctuation and so on, and its capacity utilization rate was low until it reached full production at the end of March. 2023Q2, the company has achieved full production and operation, with shipments of more than 2.5 million km in April and full orders in May. It is expected to complete the production capacity improvement plan in June, and the production capacity is expected to reach 6 million km / month after completion, with a stable and smooth release of production capacity and a substantial increase in production and sales.

In addition, since July 2022, the company began to put into 20-wire machine to improve production efficiency, and through technology, capital to solve the problem of insufficient supply of tungsten wire busbar. We believe that with the gradual realization of the company's scale effect, the company's overall profitability is expected to maintain the current level in the context of a slight decline in product prices.

The incentive plan is bound to the core backbone, and the assessment goal shows confidence in development. On July 6, the company issued the 2023 stock option incentive plan. This incentive plan is intended to grant 2.28 million stock options, accounting for 1.01% of the company's total equity. The incentive targets include middle managers, core technology and business backbones, of which middle managers and core technology business backbones account for more than 82%. The company-level incentive plan performance evaluation year is two fiscal years from 2023 to 2024. The first exercise period assessment target is that the net profit in 2023 will reach 260 million yuan or the operating income in 2023 will increase by 100% over 2022. The second exercise period assessment target is that the net profit in 2024 will reach 500 million yuan or the operating income in 2024 will increase by 250% over 2022. Based on this calculation, the net profit in 2022-2024 corresponds to 135.44% CAGR and revenue corresponding to CAGR of 87.08%. We believe that this incentive plan is conducive to the deep binding of core backbone interests, while the company has high performance evaluation goals, which fully demonstrates the confidence of the company's development.

Profit forecast

The forecast company's income from 2023 to 2025 is 14.6,21.5,2.76 billion yuan respectively, the EPS is 1.39,2.23,2.89 yuan respectively, and the current stock price is 15.8,9.8,7.6 times corresponding to PE, respectively, maintaining the "buy" investment rating.

Risk hint

The price of raw materials is rising; the research and development of tungsten wire is not as expected; the sales volume of the diamond line is not as expected; the competition in the industry is intensified; the systemic risk of the market; and the effect of the equity incentive plan is not as expected.