Incidents:
The company announced its interim report. In the first half of 2023, it achieved revenue of 318 million yuan, an increase of 9.72% over the previous year; net profit of Gimu was 38.37 million yuan, an increase of 1.84% over the previous year.
Comment:
The company's gross margin came under pressure in the second quarter. In the second quarter, the company achieved revenue/net profit of 179 million yuan/20.3796 million yuan, a year-on-year increase of 15.54%/1.22%. The revenue growth rate increased compared to 23Q1, while the increase in net profit from Gimu slowed slightly compared to Q1. 23Q2 gross margine/net margin was 19.33%/11.42% respectively. The gross margin dropped significantly, down 1.76 PCT/1.56 PCT from the previous year, and 3.84 PCT/1.49 PCT from the previous year. 23Q2 sales/management/R&D/financial expenses were 2.36%/3.44%/3.68%/-4.51%, respectively, down 0.4 PCT/-0.24 PCT/-0.49 PCT/2.55PCT from the previous year, down 0.32 PCT/0.22 PCT/-0.5 PCT/-2.24PCT.
In central China, revenue increased rapidly in the first half of the year. In the first half of the year, board/countertop revenue reached 209 million yuan/108 million yuan respectively, up 16.18%/-0.06% year on year, gross margin was 24.52%/13.66%, respectively, a year-on-year change of 2.62 PCT/-6.68 PCT. The board gross margin performance in the first half of the year was relatively good. In the first half of the year, East China/South China/Central China/Overseas respectively achieved revenue of 1.36/0.71/0.22/64 million yuan, a year-on-year increase of 4.9%/4.51%/339.11%/2.32%. The company's key regions, East China, South China and overseas revenue grew steadily, while central China achieved a high revenue growth rate in the first half of the year.
The company is one of the leading enterprises in the artificial quartz stone industry in China. The quartz products produced by the company have passed many certifications in China, South Korea, the United States and the European Union, and is one of the largest artificial quartz stone surface manufacturers and export bases in China.
The company actively lays out a new silicon crystal material race track. In June 2022, the company signed a “Project Investment Contract” with the People's Government of Yilao Autonomous County, Luocheng County, Hechi City, Guangxi Zhuang Autonomous Region. The company plans to invest no less than 1 billion yuan to build an integrated R&D, development and manufacturing project for new silicon crystal materials locally. According to the company's announcement, the convertible bonds issued by the company were listed on April 25. The total capital raised was 540 million yuan for the Luocheng Silicon Crystal New Material R&D, Development and Manufacturing Integrated Project (Phase I). This project will be put into operation in the first half of '24. Furthermore, according to the company's “Investor Relations Activity Record Form for the 2022 Annual Performance Briefing”, the company's own funds to produce high-purity quartz sand for quartz crucibles plans to begin construction of a pilot line this year, and is expected to be put into operation in the first half of next year; the two mines purchased by the company last year are in the mining process, and are expected to be mined in the second half of this year.
Maintain the company's “increase in holdings” rating and adjust profit forecasts based on the company's interim report. The company's net profit from 2023 to 2025 is expected to reach 0.93, 165 million yuan, and 237 million yuan respectively, up 8%, 78%, and 44% year-on-year, corresponding to 32, 18, and 13 times the valuation.
Risk warning: Project commissioning falls short of expectations, valuations and profit forecasts fall short of expectations.