High quality crucibles are in short supply, and performance has grown rapidly

At 2023H1, the company achieved revenue of 1,455 million yuan, an increase of 150.19% over the previous year; net profit of 408 million yuan, an increase of 342.85% over the previous year, achieving a gross profit margin of 36.00% and a net interest rate of 28.04%. 2023Q2 achieved revenue of 818 million yuan, a year-on-year increase of 161.61%, and a year-on-month increase of 28.66%; net profit of 236 million yuan, a year-on-year increase of 389.04%, a month-on-month increase of 36.96%, a gross profit margin of 37.31%, a month-on-month increase of 2.98 pcts, a net interest rate of 28.80%, and a month-on-month increase of 1.74 pcts. The company's performance increased dramatically because in the first half of 2023, the rapid development of the photovoltaic industry drove a rapid increase in demand for monocrystalline silicon materials, and the company's orders for quartz crucibles increased dramatically, which led to a sharp increase in business performance.

Quartz crucibles contributed to the main performance. Increased profitability ensured the company's high-quality development 2023H1, benefiting from the rapid development of the photovoltaic industry driving a rapid increase in demand for monocrystalline silicon materials, leading to a rapid increase in demand in upstream supporting industries such as quartz crucibles. The company's quartz crucible products achieved revenue of 936 million yuan, a year-on-year increase of 242.23%, a gross profit margin of 45.36%, and a year-on-year increase of 8.25 pcts; in terms of silicon material cleaning, the company increased investment in R&D, improved production efficiency through automated equipment, and further improved processing capacity and treatment of silicon materials Consistent quality achieved cost reduction and efficiency. The company's photovoltaic supporting processing services achieved revenue of 463 million yuan, a year-on-year increase of 74.63%, a year-on-year increase of 20.51%, and a year-on-year increase of 1.98 pcts.

Asset raising can accelerate expansion and seize the boom period in the industry

2023H1, the company continues to promote the implementation of additional production capacity, including: 1) Ningxia Quartz Crucible Phase I: As of 2023H1, the company continues to invest in its own capital construction. Currently, the project has progressed by more than 40%. After the project is completed, the company will add 80,000 units/year of solar-grade quartz crucible and semiconductor-grade quartz crucible production capacity; 2) High quality quartz products project: The project has invested 130 million yuan, and the project progress is over 70%. It is expected to be ready for use in December 2023. After the completion of the above project, the company's quartz crucible product structure and product system will be further optimized and improved.

Profit forecasting and valuation

Raise the profit forecast and maintain the “buy” rating. The company is a leading domestic quartz crucible company. The upstream quartz sand supply management is excellent, and the product quality industry is leading. Considering that the supply of high-quality quartz crucibles is in short supply and prices remain high, we raised our profit forecast. We expect the company's net profit to be 1,116 billion yuan, 1,406 million yuan, and 1,743 billion yuan respectively in 2023-2025 (before the increase: 9.07, 12.19 billion yuan, 1,529 billion yuan, respectively), corresponding EPS is 580, 7.31, 9.06 yuan/share, and corresponding PE is 9, 7, and 5 times, maintaining the “buy” rating.

Risk warning: PV demand fell short of expectations, quartz sand production expanded beyond expectations, and increased profitability fell short of expectations.