Key points of investment

The company's performance grew rapidly, and its profitability improved markedly

In 2023Q1-Q3, the company achieved operating income of 2,326 billion yuan, a year-on-year increase of 147.76%, net profit of 588 million yuan, a year-on-year increase of 280.59%, a gross profit margin of 33.31%, and a net profit margin of 25.30%. The main reason is that the sales scale of quartz sand crucibles, the company's main business, has expanded, and revenue has achieved rapid growth. In 2023Q3, the company achieved operating income of 871 million yuan, a year-on-year increase of 143.81%, a net profit of 188 million yuan, a year-on-year increase of 188.89%, a decrease of 23.37% over the previous year, a gross profit margin of 28.82%, a decrease of 8.49pct over the previous month, and a net profit margin of 20.73%, a decrease of 8.07pct over the previous month. 2023Q3, affected by the purchase price of the raw material quartz sand, the company's net profit declined compared to 2023Q2.

Continued expansion of production guarantees long-term competitiveness, and continuous breakthroughs in the semiconductor crucible field The company continues to promote the application of quartz crucible products in the photovoltaic and semiconductor fields: 1) Photovoltaic field: The company actively expands production to meet the needs of downstream customers and signs long-term orders to guarantee long-term development. The company has signed long-term strategic cooperation agreements with TCL Zhonghuan and its subsidiaries, while continuously developing new customers, and has signed strategic cooperation agreements or annual framework contracts with well-known companies in the industry such as Youyan Semiconductor, Baotou Artes, and Shuangliang Energy Saving to maintain long-term and stable cooperative relationships; 2) Semiconductor field: The company's semiconductor business continues to break through. As of September 22, the company's research and development of 32-inch semiconductor-grade quartz crucibles has been completed, and 28-inch semiconductor-grade quartz crucibles have been officially mass-produced and supplied to downstream customers.

The supply of high-quality quartz sand is tight, and fund-raising projects open up the growth ceiling. With the rapid growth of downstream photovoltaic demand, the company is actively expanding production to guarantee market share to meet the needs of downstream customers. As of 2023H1:1) Ningxia Quartz Crucible Phase I: The company continues to invest its own capital in construction. Currently, the project is progressing more than 40%. After completion of the project, the company will add 80,000 units/year of solar-grade quartz crucibles and semiconductor-grade quartz crucible production capacity; 2) High quality quartz products project: The project has invested a total of 130 million yuan, and the project progress is over 70% in December 2023. Yes Status of use. After the completion of the above projects, the company's quartz crucible product structure and product system will be further optimized and improved.

Profit forecasting and valuation

Lower the profit forecast and maintain the “buy” rating. The company's high-quality quartz crucibles have obvious performance advantages and rich customer resources. Profitability is under pressure in the short term, considering the downward price of downstream silicon wafers and components. We downgraded the company's profit forecast. It is estimated that the company's net profit for 2023-2025 will be 8.01, 12.22, and 1,525 billion yuan (11.16, 14.06, and 1,743 billion yuan respectively before the reduction), corresponding to EPS of 4.16, 6.35, and 7.93 yuan, and PE of 11, 7, and 6 times, respectively, maintaining the “buy” rating.

Risk warning: Demand for components falls short of expectations; worsening competitive landscape; fluctuations in raw material prices; risk of recovery of receivables.