Performance summary: the company released the third-quarter report of 2023: revenue in the first three quarters of 2023 was 18.788 billion yuan, + 114.83% compared with the same period last year; net profit was 1.403 billion yuan, + 68.98%; and non-return net profit was 1.313 billion yuan, + 64.73% over the same period last year. Of these, the revenue in the third quarter was 6.659 billion yuan, compared with-0.09%; the net profit returned to the mother was 785 million yuan, with a month-on-month ratio of + 575.21%; and the non-net profit was 765 million yuan, with a month-on-month ratio of + 394.76%.

The sharp increase in profit in the third quarter compared with the previous quarter is mainly due to the impairment loss of assets of about 200 million yuan in the second quarter.

In the third quarter, the operating rate of the wafer industry increased, the impairment factors were eliminated, and the company's wafer shipments and profits increased significantly compared with the previous quarter. Silicon prices bottomed out in June, domestic installed demand increased month-on-month in the third quarter, and the operating rate of the industrial chain also increased. According to data from the Silicon Industry Branch, China's wafer production in the third quarter was about 174GW, an increase of about 25% month-on-month, and wafer prices also increased steadily and slightly after mid-July. In the third quarter, the company maintained a high growth rate of silicon wafers, expected shipments to exceed 10GW, a profit of about 6 points per watt, and a significant improvement in volume and profit-to-ring ratio. 23Q3 has a gross profit margin of 20.44%, with a month-on-month ratio of + 7.43ppm, and a net profit margin of 12.31% with a month-on-month ratio of + 10pp.

Wafer production capacity continues to be built, and the actual wafer production capacity will reach 100GW by 2025. In November 2022, the company announced the expansion plan of Baotou Phase III silicon wafer 50GW. The current project is under construction and is expected to be gradually put into production in 2024 and reach production by 2025. Baotou Phase I and Phase II projects actually have the production capacity of 50GW, and the maximum wafer production capacity of the company can reach 100GW after the third phase of 50GW is put into production.

There are sufficient orders for energy-saving and water-saving equipment on hand, and the hydrogen energy business continues to break through. The company's air cooling tower and bromine cooler industry continue to maintain a high market share, full orders for energy-saving and water-saving equipment, and adequate revenue and profits in 2024. In terms of hydrogen energy equipment, the company completed the production capacity of 300 hydrogen production systems in May; at the beginning of September, the company's 2000Nm?/h electrolytic cell with independent intellectual property rights was successfully offline, setting a new record for the maximum hydrogen production capacity of the same product, and the hydrogen energy business maintained a leading edge.

Profit forecast and investment suggestion: the company is a leading enterprise of energy-saving and water-saving equipment and reduction furnace, and its performance has been gradually realized since the layout of silicon wafer business in 2021. The company plans the component business and further expands the silicon wafer production capacity, and the photovoltaic business is expected to develop continuously and steadily. We expect the compound growth rate of homed net profit over the next three years to be 59.53%, maintaining the "buy" rating.

Risk tips: wafer shipments may fall short of expectations; risk of rising raw material costs, newly signed orders, delivery schedule or lower than expected.