Summary of events. The company released the third quarter report, 23Q1-Q3 achieved revenue of 5.804 billion yuan,+2.14% year-on-year, net profit attributable to parent 423 million yuan,+1.82% year-on-year, net profit deducted from non-parent 425 million yuan,+3.96% year-on-year; Split 23Q3 to achieve revenue of 2.09 billion yuan, year-on-year +6.76%, net profit attributable to parent 162 million yuan, year-on-year +224.39%, net profit deducted from non-parent 168 million yuan, year-on-year +241.42%.

Q3 Profitability level is basically stable, cash expenditure has increased. The gross profit margin/net profit margin of Q3 was 20.46%/ 7.86% respectively,-0.06/ -1.79pct month-on-month and +7.84/ +5.34pct year-on-year. At the expense end, the sales/management/R & D/finance expense ratio was 7.27%/ 11.67%/6.28%/ 3.31%, month-on-month +0.93/ +1.46 / +0.82 / +1.37 pct, the management expense ratio increased, and the net interest rate decreased slightly. In terms of cash flow, 23Q1-Q3 realized net cash flow from operating activities of RMB 685 million yuan,-43.36% year-on-year, among which, Q3 commodity and labor purchase expenditure increased significantly, cash flow pressure, 23Q3 realized net cash flow from operating activities of RMB 168 million yuan,-63.19% year-on-year.

Policy combination to promote demand recovery, soda ash market hot inventory low. Float glass operated at the bottom of the price of 1900 yuan/ton in July. Since August, the real estate support policy frequently came out, the downstream started well, the demand end warmed up and drove the price upward. At the end of August, the price rose to 2100 yuan/ton and remained stable. Raw material end, soda ash goods tight price rise, at the end of August prices quickly rose to 3000 yuan/ton, according to Longzhong information statistics, September 7 soda ash industry inventory hit a new low in the past 5 years. Under the combined effect of demand and raw materials, we expect the gross profit margin of the float glass business of the Company to remain stable and the profit of soda ash business to increase.

Photovoltaic glass domestic business turned into profit, overseas business profit is considerable. 23Q3 Domestic ground power stations continued to advance, module factories started to upgrade, driving the demand for photovoltaic glass; supply, photovoltaic ultra-white rolled glass production capacity continued to release, from the end of June to the end of September, production capacity increased from 88,900 tons/day to 93,100 tons/day, an increase of 4.67%. According to Zhuochuang information, under the action of supply and demand, the average price of photovoltaic glass rose slightly, and the average price of 23Q3 photovoltaic glass 3.2mm was 26.65 yuan/square meter,+1.55% year-on-year. Long-term perspective: PV glass industry is in the upward period, future demand certainty is high, profit level has upward space. At present, the photovoltaic business of the Company is in a period of rapid growth. With the improvement of operation and management level, scale effect will gradually appear, driving double increase of revenue and profit. On the domestic market, 23H1 Ningxia Jinjing realized revenue of 374 million yuan, net profit of 13.3 million yuan, net interest rate of 3.55%, and realized loss reduction; on the foreign market, Malay Jinjing 23H1 realized revenue of 263 million yuan, net profit of 25.24 million yuan, net interest rate of 9.59%, and relatively high profitability. In May this year, the second line of Malay gold crystal thin film photovoltaic module glass backplane was ignited at 600t/d; in September this year, Tengzhou gold crystal second line 600t/d was upgraded and transformed into TCO glass production line project. With the continuous promotion of preliminary product verification and introduction, the production line operation gradually matured, and the photovoltaic glass business is expected to contribute more considerable profit level in the future.

Investment suggestion

Considering the lag in the transmission of real estate policies and the fact that it still takes time for the boom of the industry to pick up, we have lowered the company's operating income forecast for 2023-2025 by 83.98/ 94.78/10.771 billion yuan.(original 89.25/101.77/116.59 billion yuan), downward adjustment of net profit forecast of 5.98/ 7.57/967 million yuan (Original 7.13/8.47/1.00 billion yuan), EPS 0.42/ 0.53/ 0.68 yuan (original 0.50/0.59/0.70 yuan), corresponding to the closing price of 6.84 yuan on October 27, 16.63/ 13.14/ 10.29x PE, maintaining the "buy" rating.

Risk hint

Demand is lower than expected, cost is higher than expected, production is not as expected, systemic risk.