Incident: The company issued the “Notice on the Progress of Promoting the Action Plan to “Improve Quality, Increase Efficiency, and Value Returns” and Share Repurchase Through Centralized Bidding Transactions”. The announcement stated that in order to implement the “investor-based” development concept of listed companies, protect the interests of all shareholders, and based on confidence and recognition of the company's future development prospects and value, the company will take measures to effectively promote the “improve quality, increase efficiency, and focus on return” actions to establish a good market image of the company.
Focus on the “coal-electricity-silicon” industrial chain collaboration model and promote the improvement of the upstream and downstream layout. As of September 2023, the company has an industrial silicon production capacity of 1.22 million tons/year and a silicone monomer production capacity of 1.73 million tons/year. According to relevant statistics at the end of 2022, the company's industrial silicon and silicone production accounts for about 30% of the total domestic output. In January 2024, the company's official public account published information stating that the first 100,000-ton production line of the company's “200,000 ton polysilicon project” has successfully achieved high quality production. It has already produced high-purity polysilicon to meet the usage requirements of downstream N-type batteries, while the other 100,000 ton production line is scheduled to begin joint testing in February 2024. In May 2023, the company issued an announcement stating that the subsidiary Hesheng New Materials 20,000 wideband silicon carbide substrates and epitaxial wafers has passed the inspection and has mass production capacity, successfully achieving a breakthrough in domestic production. In the future, the company will continue to focus on the “coal-electricity-silicon” industrial chain collaboration business model, continuously improve the production technology level and market share of industrial silicon and silicone products, further promote the layout and construction of key projects such as the integrated photovoltaic industry and silicon carbide materials, give full play to the collaborative advantages of the industrial chain, and promote the company's high-quality development.
Using own funds to buy back the company's shares shows confidence in the company's development. In December 2023, the company issued an announcement stating that it plans to use its own funds to repurchase the company's shares through centralized bidding transactions. The total repurchase capital is 5-10 billion yuan, and the corresponding repurchase price of shares will not exceed 80.40 yuan/share. At the same time, all of the company's share repurchases will be used for employee stock ownership plans or equity incentives. As of February 29, 2024, the company had repurchased a total of 7.848 million shares of the company's shares through centralized bidding transactions, accounting for 0.66% of the company's total share capital. The corresponding purchase price range was 42.51-52.12 yuan/share, and the total amount paid reached 391 million yuan. The company's current share repurchase shows, on the one hand, information on the company's future development and recognition of the company's value. At the same time, it will also effectively push the company to establish and improve a long-term incentive mechanism, fully mobilize the enthusiasm of the company's employees, and closely integrate shareholders' interests, company interests, and employees' personal interests.
Profit forecasting, valuation and rating: The company issued an action plan to “improve quality, increase efficiency and focus on return” while promoting large share repurchases, which shows the company's determination and confidence in future development. Considering that the current prices of industrial silicon and silicone products are still at a low level, we lowered the company's profit forecast for 23-25. The company's net profit for 23-25 is expected to be 28.35 (down 23.9%) /40.52 (down 26.4%) /51.24 billion yuan (down 29.5%), respectively. The company is a leader in the domestic industrial silicon and silicone industry. In addition, it continues to expand production capacity. In addition, it is expected to accelerate the company's future growth and maintain its “gain” rating by further expanding its production capacity.
Risk warning: Product prices fluctuate, downstream demand falls short of expectations, capacity construction risks.