Description of the event

Tianyi Shangjia released: 1. 2023 Annual Report: Achieved annual revenue of 2.11 billion yuan, an increase of 113.8% year on year; realized net profit of 144 million yuan, down 18.9% year on year. 2. 2024Q1 Quarterly Report: Revenue of 347 million yuan, up 11.7% year on year, attributable net profit - 130 million yuan, down 386% year on year.

Incident comments

The volume of the photovoltaic industry has increased, and rail transit has declined. Looking at the spin-off: 1. Rail transit business revenue was 130 million yuan, down 42% year on year, gross profit margin -15.6%, down 73.6 pcts year on year; 2. The photovoltaic sector was 1.75 billion yuan, up 198.8% year on year. The sharp increase in revenue was mainly supported by rapid release of quartz crucibles combined with collaborative sales of traditional thermal fields; gross profit margin was 31.5%, down 20.35 pcts year on year. 3. The aerospace sector's revenue was 224 million yuan, up 42.96% year on year, gross profit margin was 43.6%, down 3.53 pct year on year.

Specifically, in terms of sales, rail transit gates sold 293,000 pieces, up 82% year on year; carbon carbon hot field sales were 25.75 million tons, up 93% year on year, and 44,000 quartz crucibles, a significant increase over the previous year. In addition, in 2023, the company accrued asset impairment losses of RMB 33.92 million and credit impairment losses of RMB 14.78 million. As a result, net profit of 144 million yuan was realized, a year-on-year decrease of 18.9%.

Looking at the single quarter, 23Q4 and 24Q1 revenue were 340 million yuan and 350 million yuan respectively, up 4% and 12% year on year; net profit attributable to the single quarter was -0.92 and -130 million yuan, with losses for 2 consecutive quarters. We judge that the core or downstream demand performance was relatively sluggish.

The quartz crucible remains the core support. As of the 3rd quarter report of 2023, the company has signed a long-term procurement framework agreement with Silicon Beko of the United States. The two parties have agreed that from 2024 to 2028, the company will purchase a total of 7,817 tons of quartz sand from Sibelco.

At the same time, the company chose to expand its quartz crucible production capacity in Jiangsu and Sichuan, and some production lines are expected to be put into use in 2024.

The multi-dimensional growth curve logic remains unchanged, and there is more room for growth in the medium term. After years of dedicated layout, the company has formed a multi-dimensional business curve, such as a high-speed rail gate, carbon carbon heat field, quartz crucible, carbon ceramic brake disc, lithium electric heating field, etc. Looking at it now, although demand from many business industries is under pressure in the short term, there is still plenty of room for growth in the medium term. What needs to be paid attention to is that the company's layout in every field is based on production-side processes, technology and cost as important layout elements, continuously strengthening its cost advantage and competitiveness in the market where it is located, thereby providing solid backing for mid-term share development.

The expected 2024-2025 performance is 530-700 million yuan, corresponding PE is 8.4 or 6.3 times, and the purchase rating.

Risk warning

1. The capacity utilization rate of quartz crucibles is insufficient;

2. The price performance of photovoltaic heat fields is weak.