Key points of investment
The high downstream boom is driving demand for high-purity quartz sand. The company's performance showed explosive growth by 2023H1. The company achieved operating income of 3.434 billion yuan, an increase of 392.71% over the previous year; net profit of 2,431 billion yuan, a year-on-year increase of 742.52%, a gross profit margin of 87.75%, and a net interest rate of 70.99%. In 2023Q2, the company achieved operating income of 2,211 million yuan, an increase of 80.79% over the previous month; net profit for the mother was 1.61 billion yuan, an increase of 96.17% over the previous year.
The company's performance has achieved rapid growth. The main reasons are: 1) Driven by rapidly growing demand in downstream semiconductor, photovoltaics and other industries, the demand for high-purity quartz sand continues to rise; 2) The company's product advantages are outstanding, and at the same time, the 60,000 tons/year production capacity project has been implemented at an accelerated pace to meet the rapid demand for photovoltaic development, and its market share has increased rapidly.
The production capacity construction of photovoltaic-grade quartz sand is progressing smoothly, and downstream customers continue to expand and drive rapid performance growth 2023H1. The company actively grasps the industry window while promoting capacity expansion and customer expansion. 1) Production capacity:
With its core technical advantages in the field of high purity quartz materials, the company actively promoted the construction of a 60,000 tons/year high purity quartz material project with mass production of 20,000 tons/year of high purity quartz sand (expected to be put into operation in 2023H2); 2) Customer development: With its product advantages, the company actively promoted the increase in market share, and established strategic partnerships with many well-known domestic photovoltaic companies to achieve rapid growth in business performance in the first half of 2023.
Semiconductor quartz technology continues to be certified, the construction of an international marketing team is accelerated by 2023H1, the company continues to promote downstream certification of semiconductor products, and continues to make breakthroughs in the field of optoelectronics. In terms of semiconductors, the company continues to promote certification of electronic grade semiconductor quartz products. It has passed Tokyo Electronics high temperature diffusion and electronic etching certification, and US LAM etching certification. The US application material certification also continues to make phased progress. The application field of products in semiconductors is expanding, and its market share is expected to continue to increase. In the future, the company will continue to strengthen the construction of an international marketing team and accelerate product certification for other mainstream international and domestic semiconductor equipment vendors on the basis of passing the semiconductor product certification of Tokyo Electronics of Japan and LAM of the United States.
Profit forecasting and valuation
Raise the profit forecast and maintain the “buy” rating. The company is a domestic high-purity quartz faucet company, and the construction of additional production capacity continues to advance. Considering that downstream photovoltaic demand remains high, the situation where the supply of high-purity quartz sand is in short supply will continue for a long time, we raised our profit forecast and estimated that the company's net profit for 2023-2025 would be 6.277 billion yuan, 12.019 billion yuan, and 15.00 billion yuan respectively (before the increase, 3.488 billion yuan, 5.156 billion yuan, and 6.527 billion yuan, respectively), corresponding EPS to 1,738, 33.27 billion yuan, 41.52 yuan/share, and corresponding PE, respectively. Maintain a “buy” rating.
Risk warning: The expansion of production of high-purity quartz sand exceeds expectations; the risk of fluctuations in the upstream industrial chain; the rise in the price of quartz sand falls short of expectations.