Incident: According to the 2023 performance forecast released by Quartz Co., Ltd., the company achieved net profit of 4.75 billion yuan to 5.33 billion yuan in 2023, an increase of 351% to 407% over the previous year; the net profit for Q4 is expected to be 54-1.12 billion yuan, an increase of 13%-133% over the previous year, and a decrease from month to month.
Q4 Performance is under pressure, or due to a phased slowdown in demand. Competition in the photovoltaic industry continued to intensify in 2023Q4, silicon wafer prices continued to fall, and manufacturers accelerated production cuts and warehouses. Among them, demand for P-type products and N-type products was further divided, and demand for P-type products declined, so procurement of crucibles and high-purity quartz sand products was reduced. Furthermore, although the current supply of more scarce inner layer sand and middle layer sand is still tight, the tight situation has eased due to the rapid increase in the supply of outer sand.
Long-term demand is expected to pick up, and increased production will lead to increased performance. As silicon wafer storage is completed and operating rates increase, demand is expected to continue to pick up, then the price of high-purity quartz is still supported, and the overall trend is relatively stable. Furthermore, the company's new 60,000 tons of high-purity quartz sand production capacity will gradually be put into operation, and sales are expected to increase significantly in 24 years. Even if product prices loosen later, the overall performance will remain elastic.
Strengthen the semiconductor field and continue to grow. By overcoming continuous melting production system technology, the company simultaneously accelerated research and development of new high-purity quartz sand products and introduced various new high-end quartz products for semiconductors to the market. Quartz materials for semiconductors are also benefiting from certification from international semiconductor equipment vendors and continuous investment in R&D. The market is showing rapid expansion, and product profitability is expected to gradually increase. On November 21, 2023, Quartz Co., Ltd. announced that it will invest in the construction of an electronic grade quartz material project with an annual output of 3,000 tons in the Donghai Economic Development Zone in Jiangsu, with an investment amount of up to 1.03 billion yuan, mainly used in the semiconductor field.
The 2023-2025 EPS was adjusted to 13.95, 14.98, and 19.22 yuan (the original forecast for 2023-2024 EPS was 7.00 and 11.29 yuan), mainly to adjust the unit price and sales volume of high-purity quartz sand during the forecast period. Based on the 2024 average 7X PE calculation of comparable companies, the corresponding target price is 104.86 yuan, maintaining the “buy” rating.
Risk warning
The price of high-purity quartz sand fell rapidly, production capacity was lower than expected, and the expansion of the semiconductor sector fell short of expectations