Results were stable for the first three quarters of 2023. In the first three quarters of 2023, the company achieved operating income of 527 million yuan, an increase of 6.3% year on year; net profit to mother was 67 million yuan, an increase of 1.1% year on year. On a quarterly basis, Q1 to Q3 achieved net profit attributable to mother of 0.18 million yuan/20 million yuan/29 million yuan respectively, up 2.6%/1.2%/0.2% from the same period in 2022, and achieved a steady and slight increase overall.
The company is one of the leading enterprises in the artificial quartz stone industry in China. The quartz products produced by the company have passed many certifications in China, South Korea, the United States and the European Union, and is one of the largest artificial quartz stone surface manufacturers and export bases in China.
The Guangxi Silicon Crystal Material Base is used for the application of the new material quartz. The company issued convertible bonds in 2023. The fund-raising project was the first phase of the Guangxi Luocheng Silicon Crystal New Material Project, with a total investment of 540 million yuan. The project planned four production lines: ductile production line/sheet sand production line/TFT powder workshop/ultrafine powder workshop. The expected IRR after tax is 18.5%, and the recovery period is 6.2 years (including the construction period); combined with the 18-month construction period, the annual profit contribution may reach 110 million yuan. The Luocheng project is mainly engaged in the deep processing of new crystalline silicon materials, deep processing of different grades of quartz ore into quartz powder for liquid crystal display glass, quartz powder for ultra-pure ultra-fine electronic electrical fillers, low-iron quartz sand for photovoltaic glass, and artificial quartz stone fillers; among them, artificial quartz stone fillers can meet the company's artificial quartz stone business raw material requirements (2021 procurement amount is about 130 million yuan).
High-purity quartz sand and quartz powder production lines benefit from the price of high-grade quartz sand. The company used its own capital to invest in high-purity quartz sand and nano-grade high-purity quartz powder production lines, which can be used in strategic emerging industries such as photovoltaic polysilicon and semiconductor wafers; the production line uses the highest grade quartz ore among the high-quality quartz ore resources in Luocheng, Guangxi. According to information from Shanghai Nonferrous Metals Network in January 2024, the average price of a ton of high-purity quartz sand for inside/medium/outer quartz crucibles in China is 41.5/195/85,000 yuan, respectively, and the price is still high.
Maintain an “Overweight” rating. Considering the smooth progress of the company's newly built production capacity and strong downstream demand, the profit forecast is estimated to be 0.9/2.0/30 billion yuan from 2023 to 2025, an increase of 7.6%/116%/51% over the previous year, corresponding to PE 36.7/17.0/11.3 times.
Risk warning: The commissioning of the new production line falls short of expectations, downstream demand falls short of expectations, and performance falls short of expectations