The company announced 2023 and 2024Q1 results. In 2023, the company achieved operating income of 3.129 billion yuan, an increase of 118.2% over the previous year, and realized net profit of 654 million yuan, an increase of 174.3% over the previous year. In 23Q4, the company achieved operating income of 804 million yuan, down 7.8% from the previous month; net profit to mother was 65 million yuan, down 63.8% from the previous month. In 24Q1, the company achieved operating income of 340 million yuan, a year-on-year decrease of 46.6%, a year-on-month decrease of 57.7%, and realized net profit of 0.2 billion yuan, a year-on-year decrease of 87.4% and a year-on-month decrease of 66.9%. The 24Q1 profit level fell short of expectations.
Quartz crucible revenue continued to grow, and profitability declined in the first quarter. 1) Quartz crucibles: In 2023, revenue was 2.01 billion yuan, up 177.90% year on year; total sales volume was 107,700 units, down 11.13% year on year; gross profit margin was 35.98%, down 6.60 pct year on year; 2) PV supporting processing services: achieved operating income of 911 million yuan in 2023, up 49.12% year on year, gross profit margin 20.5%, up 8.07 pct year on year. The sharp decline in sales volume in 24Q1 was mainly affected by a sharp drop in order demand from downstream customers. The company's gross margin fell 7.76pct month-on-month to 14.94%. By the end of '23, the company's inventory was 488 million yuan, an increase of 361% over the same period last year, and increased to 545 million yuan in 24Q1. By the end of '23, the inventory of quartz crucibles had increased by 72.14% compared to the beginning of the period. Mainly, downstream customer N-type batteries gradually replaced P-type batteries. Crystallization technology changed from P-type to N-type, and crucible parameters had to be adjusted accordingly.
Accelerate the production capacity layout of crucibles, and continue to strengthen downstream cooperation in the industrial chain. In terms of production capacity, the company currently has a total of 24 production lines. After the implementation of the capital investment project, the company plans to add 180,000 units/year. The total production capacity of the Ningxia quartz crucible phase 1 and phase 2 projects is 324,000 units/year. After the expansion of the fund-raising project, the company's production capacity among leading quartz crucible manufacturers is 29.43%. At the technical level, the company has now completed the research and development of 32-inch semiconductor-grade quartz crucibles and has mass production capacity. The 28-inch semiconductor-grade quartz crucible has been officially mass-produced and supplied to downstream customers. In February 2024, the company signed a purchase agreement with Sibelco of the United States for high-purity quartz sand. The estimated purchase amount is US$350 million, which guarantees the medium- to long-term stable supply of key raw materials to a certain extent.
Profit forecast and investment advice: Considering the decline in order demand from downstream customers affecting the company's profit level, we expect the company's net profit to be 4.78 (-77%)/6.61 (-72%)/884 million yuan in 2024 to 2026, respectively. As a leading manufacturer of quartz crucibles in China, the company has a competitive advantage in products, and the production capacity layout and upstream cooperation in the industrial chain continue to strengthen. We gave the company a 12 times PE valuation in 2025 (originally 7 times PE in 2023), and the target price was reduced by 43% from 72.10 yuan to 41.16 yuan, maintaining the “superior to the market” rating.
Risk warning: industry demand falls short of expectations, fluctuating raw material prices, etc.