Description of the event

The company disclosed its three-quarter report: the first three quarters achieved revenue of 2.33 billion yuan, an increase of 148% over the previous year; realized imputed net profit of 590 million yuan, an increase of 281% over the previous year.

Incident comments

23Q3 revenue increased further month-on-month. From 23Q1 to 23Q3, the company's single-quarter revenue was 6.4, 8.2 billion yuan, and 870 million yuan respectively. Considering the company's gradual increase in production capacity and product price increases, we think it is more meaningful to observe the current month-on-month trend. From this perspective, 23Q2 and 23Q3 revenue growth rates were 28.7% and 6.5%, respectively. In terms of profitability, the gross margins of 23Q1 to 23Q3 were 34.3%, 37.3%, and 28.8%, respectively. There was a certain decline in 23Q3's single-quarter gross margin. In the end, 23Q3 achieved single-quarter results of 180 million yuan, a decrease of 23% month-on-month. We judge that the core reason for the month-on-month decline in 23Q3 gross margin and performance was that the increase in raw material prices was not fully transmitted. Furthermore, in 23Q3, the company's inventory increased significantly. We believe that the company may have taken the initiative to increase its stock of raw materials.

Supported by the consumable properties of quartz sand-crucibles, combined with an increase in the share of N-type, medium-term demand is still promising. Quartz sand and quartz crucibles are crystalline composites with a short life cycle and are typical consumable materials, so stock market demand can be expected; at the same time, considering the gradual release of N-type batteries, their consumption of crystal crucibles will increase significantly, so the prosperity of quartz sand and crucibles is sustainable. However, from the supply side, the progress of overseas production expansion is relatively slow. Combined with the industry's own high barriers, the pattern of high concentration in the industry will not change much within 1-2 years. Therefore, the pattern of this industry segment is still relatively stable.

The company has strong competitiveness on the procurement and production side. The company has established strategic partnerships with important domestic and foreign high-purity quartz sand suppliers, and the procurement channels for high-purity quartz sand are relatively stable. The company has mature production technology and is at a high level in the industry in terms of product manufacturing process equipment and mold configuration. At present, the quartz crucibles produced by the company have high purity, strong crystallization resistance, and good heat resistance, and have accumulated a good reputation among customers.

The expansion of production capacity provides scalability in 2024. Supported by the downstream boom, the company is actively expanding crucible production capacity. After all of the Ningxia Phase I and Phase II projects are put into operation, the company's crucible production capacity will increase to 340,000 units/year. As a leading enterprise in the industry, the scale gap with other crucible manufacturers is expected to continue to widen. Therefore, the commissioning of crucible production capacity in 2024 is also expected to provide deep elasticity to the company's revenue and profit.

The 2023-2024 performance is expected to be 790 million, or 1.16 billion, corresponding to PE of 10 or 7 times, and a buying rating.

Risk warning

1. The progress of production capacity construction is slow; 2. The supply of quartz sand is tight.