Due to the limited increase in imported sand, the supply of high-quality, large-size quartz crucibles continues to be in short supply, and prices have also stabilized at a high level. We are optimistic about the future trend of the company's quartz crucibles rising rapidly in volume and price.

The results for the first three quarters of 2023 increased 280.59% year on year, and the third quarter results increased 188.89% year on year. The company's operating income for the first three quarters of 2023 was 2,326 million yuan, up 147.76% year on year; net profit was 588 million yuan, up 280.59% year on year. Looking at the third quarter alone, operating income was 871 million yuan, an increase of 143.81%; net profit was 188 million yuan, an increase of 188.89% over the previous year.

The supply and demand for high-quality large quartz crucibles continues to be tight, and prices are stable at a high level. In the third quarter of 2023, driven by increased downstream operating rates and accelerated N-type production, the market demand for high-quality large-size quartz crucibles continued to rise, while the supply side was limited by imported sand, the increase in production and sales of high-quality large-size quartz crucibles was limited, and supply and demand continued to be tight. Although the price of downstream silicon wafers dropped significantly, the price of high-quality large-size quartz crucibles remained stable at a high level. In terms of production and sales volume, production capacity continued to rise after the company's new production line was put into operation in the first half of the year, driving continued growth in quartz crucible production and sales. In terms of gross margin, the gross margin of the company's quartz crucible business in the third quarter was 20.73%, an increase of 3.23pcts over the previous year.

Raising capital to drive further growth in performance. The company announced that it plans to raise no more than 620 million yuan in capital to invest in the Ningxia quartz crucible phase I and phase II projects, the Ningxia cutting fluid online processing project and supplementary working capital. The first phase of the project plans to build 8 quartz crucible melting lines, which can achieve a production capacity of 80,000 solar-grade quartz crucibles and semiconductor-grade quartz crucibles per year; the second phase of the project plans to build 10 quartz crucible melting lines, which can achieve a production capacity of 100,000 quartz crucibles per year. We expect that after the construction and planned projects are put into production, the company will be able to develop a production capacity of 340,000 quartz crucibles/year to support medium- to long-term development.

Risk factors: Fluctuations in raw material prices; falling sales prices of PV supporting processing services; demand for photovoltaics falls short of expectations; product and technology updates are iterative; and fund-raising projects are progressing less than expected.

Profit forecast, valuation and rating: We expect quartz crucibles to continue to be in short supply for the next 1-2 years, the company's new construction projects will support its own medium- to long-term development, and the company has a leading edge in the production of high-quality large-size quartz crucibles. We maintain the company's net profit forecast for 2023-2025 at 834/12.99/1,751 million yuan.