Main points of investment

Out of the strong α in the diamond line market, 2023H1's net profit increased by 111.01%2023H1 over the same period last year, the company's total operating income was 430 million yuan, an increase of 55.80% over the same period last year, and its net profit was 87 million yuan, up 111.01% from the same period last year. 2023Q2, the company achieved a total operating income of 277 million yuan, an increase of 80.50% over the same period last year; a net profit of 66 million yuan, an increase of 137.29% over the same period last year; a gross sales margin of 40.84%, an increase of 7.21 pct compared with the previous month; and a net sales profit rate of 23.89%, an increase of 10.09pct.

In terms of expanding production to promote large-scale cost reduction, and rapid product development and sales of tungsten wire, the company continues to promote the "thinning" of carbon steel wire. In the first half of the year, the mainstream product specification of carbon steel wire is 33 / 34 μ m, and the smallest specification has reached 30 μ m. At the same time, the company actively arranges the R & D and production of diamond wire based on tungsten filament. The mainstream product specification of tungsten wire diamond wire is 30-32 μ m, and the smallest specification is 27 μ m. At present, it has achieved sales, and realized the compatible production of carbon steel wire products and tungsten wire production equipment. In terms of production capacity, the company is embedded in the supply system of well-known wafer manufacturers at home and abroad, and actively expand production capacity. According to the disclosure of the company, 6 million km / month of production capacity equipment has been put in place in June. 2023Q2 company's production capacity is full and released every month, and its production and sales volume has increased significantly compared with the same period last year. In terms of cost, the company's production capacity economies of scale have gradually emerged, and the industry-leading "20-line machine" equipment has been fully popularized and applied through independent research and development and equipment technical transformation, effectively improving the production efficiency of the company.

The proposed acquisition of high-purity quartz sand and hydrogen energy targets, the new business layout is expected to further open the growth space 1) high-purity quartz sand: the company signed an equity acquisition intention agreement to acquire 70% of Lihui new materials.

After the completion of the acquisition, the target company will become a controlling subsidiary of the company. Li Hui Xin material is mainly engaged in the research and development, production and sales of high purity quartz sand for quartz crucible, and has successfully developed the production equipment and technology of high purity quartz sand, which has the ability of industrial continuous production.

2) hydrogen energy: the company intends to participate in 35% of the shares of Shang Xin Energy. The products of the company are related to the fields of hydrogen fuel cell, liquid flow cell and hydrogen production by electrolytic water. at present, the products with industrialization conditions are high-performance carbon-based composite bipolar plates for hydrogen fuel cells. and has established friendly business relations with a number of domestic head manufacturers.

Profit forecast and valuation

Maintain a "buy" rating. The company is a photovoltaic Kumgang line veteran leading enterprise, production capacity expansion superimposed high-value tungsten wire Kumgang line share promotion to promote the company Kumgang line products volume and profit. We estimate that the company's net profit from 2023 to 2025 will be 3.08,5.13 and 712 million yuan respectively, an increase of 238.09%, 66.83% and 38.87% respectively over the same period last year, with a corresponding EPS of 1.10,1.84,2.56 yuan per share, and a corresponding PE of 18,11 and 8 times respectively.

Maintain a "buy" rating.

Risk hint

The demand for photovoltaic installation is lower than expected; the competition in the industry is intensified; and the permeability of tungsten wire is not as high as expected.