The company released a report for the third quarter of 2023: In the first three quarters of 2023, the company achieved operating income of 2.33 billion yuan, a year-on-year increase of 147.8%, a year-on-year increase of 590 million yuan, a year-on-year increase of 280.6%, and net profit withheld from non-return to mother of 570 million yuan, an increase of 274.3%; in the third quarter of 2023, the company achieved revenue of 870 million yuan, an increase of 188.9% year-on-year. %

Crucible costs have risen, and profitability has recovered in the short term. The price of quartz sand continued to rise this year. According to SMM reports, in November, the average price of high-purity quartz sand for the inner layer of quartz crucibles was 415,000 yuan/ton, the average price of high-purity quartz sand for the middle layer was 210,000 yuan/ton, and the average price of high-purity quartz sand for the outer layer was 95,000 yuan/ton. The continued rise in quartz sand prices affected the profitability of the company's crucible products in the short term. The gross margin fell 8.5 pcts from 37.3% in 23Q2 to 28.8% in 23Q3. 7%, we expect In the future, the price of quartz sand will remain stable in the short term, the price adjustment of quartz crucibles will be smooth, and profitability is expected to be maintained.

The proportion of N-type models is rapidly increasing, and the company may benefit significantly. With the rapid release of domestic TopCon production capacity, the share of N-type silicon wafer battery products will increase rapidly; the N-type silicon wafer crystallization process requires higher quality crucibles than P-type crucibles. Against the backdrop of a relatively scarce supply of high-purity quartz sand for photovoltaics, the value of high-quality crucibles with performance advantages is expected to increase rapidly.

As the main crucible supplier of TCL Zhonghuan, an N-type silicon wafer leader in China, the company is leading the product quality industry. In the future, with the continuous growth of N-type demand, the company may benefit significantly.

Production capacity expansion continues, and upstream and downstream cooperation ensures stable sales. By the end of the first quarter of 2023, the company has a production capacity of about 120,000 quartz crucibles. The company plans to issue the Ningxia Quartz Crucible Phase I Project and the Ningxia Quartz Crucible Phase II project, all of which will increase the production capacity of 80,000 units/year and 100,000 units/year after delivery, and the company's production capacity is expected to exceed 300,000 units; in addition, the company has signed close cooperation with domestic and foreign high-purity quartz sand manufacturers, which will strongly guarantee the sales of the company's future products.

Investment proposal: Considering the rapid growth in crucible prices and raw material prices, we raised the company's forecast revenue for 2023-2024 to RMB 32.4/5.98 billion (previous value: RMB 1,629/RMB 1,861 billion), and is expected to achieve operating income of 7.43 billion yuan in 2025; net profit due to mother in 2023-2024 to RMB 7.4/1.11 billion (previous value: RMB 311/383 million yuan), and is expected to achieve net profit of 1.39 billion yuan in 2025; 2023 based on current total share capital -Diluted EPS in 2025 was 3.84/5.75/7.20, and the company's current stock price is 11/7/6 times the 2023-2025 PE multiples, respectively. Considering the company's deep upstream and downstream partnerships and the fact that the volume and price of the company's crucible still has room to rise, it maintains an “gain” rating.

Risk warning: risks such as capacity expansion falling short of expectations; PV demand falling short of expectations; and quartz sand supply exceeding expectations.