Introduction to this report:
The company announced its 2023 mid-year report. The revenue growth rate followed the price increase of quartz crucibles and accelerated quarter by quarter, maintaining the “increase in holdings” rating.
Key points of investment:
Maintain the “increase in holdings” rating. The company announced its 2023 mid-year report, achieving revenue of 1,455 million yuan, a year-on-year increase of 150.19%, and net profit of 407 million yuan, a year-on-year increase of 342.85%, exceeding market expectations.
Considering the continued upward elasticity of quartz crucible prices, we raised the 23-25 EPS to 5.26, 7.30, and 9.25 yuan (+0.81, +0.90, +1.19), and maintained the target price of 110.59 yuan based on the average valuation of 21x PE in 2023 by comparable companies.
The revenue growth rate followed the price increase of quartz crucibles and accelerated season by quarter. The company went public in the 3rd quarter of '22. 22Q2-23Q2 revenue growth rates were 41%, 69%, 136%, 136%, and 161%, respectively. The year-on-year growth rate accelerated quarter by quarter, and 23Q2 continued to maintain a sharp growth trend. In terms of sales volume, we judge that the company's quartz crucible sales volume continues to grow significantly, mainly due to the fact that the 12 production lines raised and partially released production capacity were driven by the release of production capacity. In terms of price, according to the company's convertible bond project announcement, as of Q1 in '23, the average selling price of the company's crucible had reached about 10,000 yuan/piece, which greatly exceeded the average price of 6,200 yuan/piece in '22. It is determined that the price increase in the price of the crucible in Q2 continues.
Convertible bonds increase the elasticity of future production capacity. The company recently announced a convertible bond project. It plans to use 450 million dollars for the Ningxia Quartz Crucible Phase I project and the Ningxia Quartz Crucible Phase II project. Judging that production will be put into operation from the end of 25 to the first half of '26, it is expected that 18 new lines will be added, with a production capacity of about 180,000 crucibles per year, and growth will increase further.
Resources are king, and flexibility is expected to continue. We believe that Ou Jing has locked in the upstream production of high-quality imported materials and quartz stocks, and that the downstream is backed by Central, so that resources are king. We believe that after high-purity quartz sand became a stuck link in the industrial chain, with the price reduction of silicon materials, non-silicon cost control became the core of competition among silicon wafer companies since 23 years ago, and high-quality quartz crucibles became an important factor in this.
Risk warning: risk of fluctuations in raw material supply and prices, risk of policy changes.