Events: The company released its report for the third quarter of 2023. In the first three quarters of 2023, the company achieved revenue of 119 million yuan, a year-on-year decrease of 69.50%; net profit of 41 million yuan, a year-on-year decrease of 130.50%; net profit after deducting non-net profit of 44 million yuan, a year-on-year decrease of 133.69%. On a quarterly basis, Q3 achieved revenue of 40 million yuan, a year-on-year decrease of 68.44%, an increase of 51.11%; net profit of 0.18 million yuan, a year-on-year decrease of 139.42%, a decrease of 50.70% over the previous year; net profit after deducting non-net profit of 018 million yuan, a year-on-year decrease of 142.66% and a year-on-month decrease of 42.78%.

Weak demand affects overall performance, and profitability needs to be improved: Affected by the downturn in the semiconductor industry cycle, the company's downstream customer orders declined sharply, and the company's revenue fell 69.50% year-on-year in the first three quarters of 23 years. The company's comprehensive gross margin for the first three quarters of 23 years was 26.67%, -27.30pcts; net profit margin was -34.41%, y-68.98pcts. Q3 The company's gross margin was 21.06%, y-29.95pcts, month-on-month -1.97pcts; net margin was -43.68%, y-78.42pcts, month-on-month, and -0.59pcts month-on-month. In terms of expenses, the company's sales, management, R&D, and financial expenses in the first three quarters of 2023 were 2.81%/40.10%/16.83%/-6.39% respectively, with year-on-year changes of +2.03/+31.71/+8.78/-4.32pcts, respectively. The increase in the company's R&D expenditure rate in the first three quarters was mainly affected by the reduction in the denominator end due to a decrease in order volume; during this period, some of the company's ongoing research projects were completed, and R&D expenses decreased by 36.22% year-on-year.

The fixed increase issuance was successfully completed, and the repurchase of shares demonstrated confidence in development: On October 13, the company issued a fixed increase progress announcement: The company used simple procedures to issue shares to specific targets and added 10,305,736 shares. The share registration procedure was completed on October 11, 2023, and the capital raised will be used to expand the production of silicon materials for integrated circuit etching equipment and supplement working capital. The “silicon material production expansion project for integrated circuit etching equipment” is a further expansion of existing product production capacity, which is conducive to strengthening the company's product supply capacity and consolidating the company's competitive advantage in the industry. Furthermore, on November 10, the company issued a share repurchase announcement: the company plans to use its own capital of no less than RMB 15 million and no more than RMB 30 million (all inclusive) to repurchase some of the company's RMB common stock (A shares) shares through centralized bidding transactions. The repurchase price shall not exceed 44 yuan/share (including principal amount). The repurchase price shall not exceed 44 yuan/share (including principal amount). The repurchase of shares will be used to implement employee stock ownership plans or equity incentive plans.

The company's share repurchase will help to further improve the company's long-term incentive mechanism, enhance team cohesion and enterprise competitiveness, and promote the company's stability, health and sustainable development.

Silicon wafer production capacity continues to rise, waiting for the semiconductor industry to pick up: In the first half of 2023, the global semiconductor industry was still in an inventory adjustment cycle. As a leading market segment enterprise in the global semiconductor industry chain, the company continues to expand production capacity and continuously optimize product structure according to downstream market demand. In terms of silicon components business, the company is continuing to expand production in Quanzhou and Jinzhou, making preliminary preparations such as equipment procurement, installation and commissioning, etc., to ensure a rapid increase in production capacity within the year. In terms of the semiconductor large-size silicon wafer business, the “8-inch semiconductor-grade silicon monocrystalline polishing wafer production and construction project” has now completed all orders for the production equipment required to produce 1.8 million pieces per year, and the first phase of the 50,000 pieces/month equipment has reached large-scale production. The 100,000 pieces/month of equipment ordered in the second phase entered the market one after another and carried out installation and commissioning work.

Currently, the company's silicon wafer production capacity is gradually climbing, and the technical indicators and yield of most products have reached or are basically close to the standards of mainstream manufacturers in the industry.

Lower the profit forecast and maintain the “increase in holdings” rating: The company's main business is the R&D, production and sales of monocrystalline silicon materials, silicon components, semiconductor-grade large-size silicon wafers and their application products. The main products are large-diameter monocrystalline silicon materials, silicon components, and large-size silicon wafers. Considering that the semiconductor industry is still in a period of inventory adjustment in the first half of the year, while the company continues to expand existing product production capacity, and expenses have increased in various periods, the company's profit expectations were lowered. It is estimated that the company's net profit for 2023-2025 will be -0.04 million yuan, 99 million yuan, and 138 million yuan. EPS will be -0.03 yuan, 0.58 yuan, and 0.81 yuan respectively, and PE in 24-25 will be 58X and 42X respectively.

Risk warning: production capacity falls short of expectations, downstream demand recovery falls short of expectations, risk of falling inventory prices, risk of market competition.