Incident: On October 27, the company released its three-quarter report for 2023. During the reporting period, the company achieved operating income of 1,767 million yuan, an increase of 169.19% over the previous year, net profit of 236 million yuan, an increase of 90.84% over the previous year, and realized net profit of 218 million yuan, an increase of 85.93% over the previous year. In the third quarter, the company achieved revenue of 794 million yuan in a single quarter, a year-on-year increase of 213.6%/20.3%, net profit of 105 million yuan, a year-on/month-on-month increase of 102.9%/22.1%, and continued performance growth.
The cost advantage withstands the risk of price reduction in hot markets, and the high profitability of quartz crucibles can be expected to stabilize. After nearly a year of price cuts and price wars, the photovoltaic carbon and thermal field industry has begun to show a more definite bottoming out signal. Currently, prices are putting a lot of profit pressure on the leaders, but at a time when IPOs and refinancing are narrowing, the incentive for second- and third-tier manufacturers to grab orders for financing at low prices has weakened, and the industry as a whole has a common demand to increase prices and maintain profits. The inflection point in the industry may occur in the first quarter of next year. Thanks to comprehensive leadership in carbon fiber prefabrication, large-scale deposition equipment, continuous high temperature equipment, and intelligent key processes, etc., the production cost of the company's carbon and carbon hot field remains in the first tier of the industry. Even in the downward cycle, the product's gross margin performance was relatively strong. Combined with the synergy brought by quartz crucibles, the company shipped 800-900 tons in the third quarter, and the net profit per ton remained at a level of about 40,000 yuan, showing resilience under the trend.
In terms of quartz crucibles, the most scarce period in the industry has passed, but the scarcity of high-quality products is still there. Supported by the price of high-purity quartz sand as a raw material, quartz crucibles were highly profitable. In the third quarter, the company maintained full production and sales of quartz crucibles, with a single net profit of 6,000-7,000 yuan, continuing to shoulder the company's heavy responsibility of profit. Although quartz sand manufacturers at home and abroad are proposing plans to expand production, we believe that the core of the shortage of high-purity quartz sand supply lies in the upstream mining sources. Until no new high-purity mineral sources are introduced, the tight balance between high-purity quartz sand and high-quality quartz crucibles is expected to continue. The service life and yield ranking of quartz crucible products produced by the company's subsidiary Xinyiyang have already ranked at the top level of the industry. Technically improved production lines and new production lines are progressing at an accelerated pace. We are optimistic about the subsequent profitability and growth of the quartz crucible business.
Investment suggestions: The company is expected to achieve revenue of 2,249 billion yuan, 3.117 billion yuan and 3.886 billion yuan respectively in 2023-2025, and realized net profit of 448 million yuan, 754 million yuan and 9.33 yuan respectively, with a year-on-year increase of 150.3%, 68.3% and 23.6%. The corresponding EPS is 0.80, 1.34, and 1.66, respectively, and the PE multiples corresponding to the current stock price are 23X, 14X, and 11X respectively, maintaining the “buy” rating.
Risk warning: capacity expansion falls short of expectations; industry competition intensifies; downstream demand falls short of expectations; risk of fluctuations in raw material prices, etc.