Description of the event

In the first three quarters of 2023, the company achieved revenue of 13.480 billion yuan, an increase of 24.8%; realized imputable net profit of 1,467 million dollars, a decrease of 11.1%; and achieved net profit of 1,376 million dollars, a decrease of 7.1%.

Q3 achieved revenue of 5.091 billion dollars, an increase of 18.8% over the previous year; imputed net profit of 577 million, a decrease of 11.1%; and net profit after deducting non-return to the mother of 538 million, a decrease of 9.4%.

Incident comments

The scale of revenue increased in the first three quarters, and profitability declined year over year. Revenue increased by 24.8% in the first three quarters. Looking at the expected revenue growth by sector, the glass sector mainly contributed to the expected revenue growth, benefiting from the expansion of production capacity for photovoltaic glass and energy-saving glass. It is expected that the electronics and display sector will remain under pressure. In terms of profitability, the gross profit margin for the first three quarters was 22.8%, down 6 pcts from the previous year, mainly affected by price cuts in float glass and silicon materials. Benefiting from the increase in revenue scale, the fee rate for the first three quarters was 10.8%, down 0.9 pct year on year, of which sales and management fees fell 0.3 and 0.5 pct respectively; the final imputed net profit rate was 10.9%, down 4.4 pct year on year; and the non-attributable net interest rate was 10.2%, down 3.5 pct year on year.

Q3 earnings remained stable month-on-month. Q3 revenue also increased by 18.8%, mainly benefiting from the increase in photovoltaic glass production capacity. In terms of profitability, the gross profit margin for Q3 was 23.1%, down 5.6 pct from the previous year. Considering the rise in prices of Q3 float glass and photovoltaic glass, it is expected that the electronics sector and solar silicon will mainly drag down profits. The rate for the Q3 period was 10.8%, down 0.5 pct year on year, of which sales and finance rates fell 0.4 and 0.2 pct respectively; the final realized imputed net profit rate was 11.3%, down 3.8 pct year on year; and the non-attributable net profit rate was 10.6%, down 3.3 pct year on year.

The layout of the entire photovoltaic industry chain. As of June 2023, the company has 7 photovoltaic rolled glass kilns and supporting photovoltaic glass deep-processing production lines in Dongguan, Wujiang, Fengyang and Xianning, with an annual output of about 2.72 million tons of original photovoltaic rolled glass sheets. The products cover deep-processing products with a variety of thicknesses of 1.6-4mm. In May 2023, the Fengyang No. 4 kiln was successfully ignited; the company is building two photovoltaic glass production kilns with a melting capacity of 1,200 tons per day in Beihai and supporting processing lines are being built in an orderly manner according to the plan. As of June 2023, the scale of production capacity has successfully ranked among the highest in the industry.

The advantages are obvious, and I'm looking forward to improvements in electronic glass. Beginning in 2021, high-alumina second-generation KK6 glass progressed smoothly and began to be widely used by high-end domestic brand customers; in the first half of 2023, the company's high-alumina second-generation (KK6-P) products continued to achieve mass production and delivery among new customers, indicating that the company has firmly established itself among high-end domestic customers. Hebei Window's new ultra-thin electronic glass production line with a melting capacity of 110 tons per day has entered the preparation stage before commercialization. At present, CSG Electronic Glass has completed comprehensive coverage of electronic glass products in various high and low end application scenarios, forming a more consolidated supply chain system based on market competition.

Investment suggestions: Electronic cover glass is expected to lead the domestic replacement trend; the photovoltaic business may expand rapidly and enter the first tier; engineering glass is positioned as high-end, and production capacity is rapidly expanding. The estimated performance for 2023 is 1.8 billion dollars, which is 9 times the corresponding PE.

Risk warning

1. The production capacity of cold restoration increased more than expected;

2. The pace of restoration of real estate completion is expected to be low.