Key points of investment
Demand for downstream quartz crucibles was strong, and profits drove the company's performance to grow rapidly in 2023. The company achieved operating income of 3.129 billion yuan, an increase of 118.25% year on year; achieved net profit of 654 million yuan, up 174.33% year on year; gross profit ratio of 30.59%, up 2.71 pct year on year, net interest rate of 20.90%, 4.27pct year on year. With the advantages of quartz crucible products, the company actively expanded new customers on the basis of protecting existing customers. Sales revenue of quartz crucibles increased dramatically, driving the company's business performance to grow dramatically.
With 2023Q4, the company achieved operating income of 804 million yuan, a decrease of 7.69%; realized net profit of 65 million yuan, a decrease of 64.09%; gross profit margin of 22.70%, a decrease of 6.12 pcts month-on-month, and a net profit margin of 8.15%, a decrease of 12.58 pcts month-on-month. With 2024Q1, the company achieved operating income of 340 million yuan, a decrease of 57.71% from the previous month, and realized net profit of 122 million yuan, a decrease of 66.15% from the previous month; the gross profit margin was 14.94%, down 7.76 pcts from the previous month, and the net profit margin was 6.38%, down 1.77 pcts from the previous month.
The scale of production and sales remained stable, and profitability improved significantly
In 2023, the company's main business, the quartz crucible business, achieved operating income of 2.01 billion yuan, a year-on-year increase of 177.90%, a total output of 110,000 units, a year-on-year decrease of 13.88%, total sales volume of 107,700 units, a year-on-year decrease of 11.13%. The gross profit of a single crucible was about 0.7 million yuan/piece, an increase of 164.24% year on year. Due to strong downstream demand and rising raw material prices, the company's quartz crucible sales price and single profitability increased significantly, driving performance growth.
Supporting business continues to expand, contributing to rapid growth in performance
In 2023, the company's PV supporting processing service business achieved revenue of 911 million yuan, an increase of 49.12% over the previous year; achieved a gross profit margin of 20.51%, an increase of 8.07pct over the previous year. By improving the degree of equipment automation and optimizing cleaning equipment to meet diversified downstream needs, the company's revenue has increased dramatically.
Accelerate the production capacity layout of the crucible business and strengthen upstream cooperation in the industrial chain. As of December 31, 2023, the company's product sales covered 19 provinces in China and went overseas to South Korea. In 2024, the company plans to add 180,000 quartz crucibles per year to gradually achieve large-scale production and enhance the company's core competitiveness. At the same time, the company further strengthened upstream cooperation and signed a Changshan high-purity quartz sand procurement agreement with Sibelco of the United States in February 2024 to ensure a stable supply of raw materials.
Profit forecasting and valuation
The profit forecast was lowered and a “gain in wealth” rating was given. The company is a leading domestic manufacturer of quartz crucibles. With the expansion of downstream demand and the increase in product prices, the company's performance has grown significantly. Considering the short-term pressure on downstream silicon wafer profits, quartz sand and crucible prices have recently declined. We have lowered the company's profit forecast for 2024-2025 and added a profit forecast for 2026. We expect the company's net profit to be 3.00, 4.04, and 492 million yuan respectively in 2024-2026 (before the reduction, the company's net profit for 2024-2025 was 12.22 billion yuan and 1,525 billion yuan, respectively), and the corresponding EPS was 1.56, 2.10, 2.55 yuan, and PE was 23, 17, and 14 times, respectively.
Risk warning: Raw material prices fluctuate, the PV industry chain cycle fluctuates, and the company's gross margin falls.