The company is a leader in the diamond wire industry, and profits are temporarily under pressure due to falling prices in the industrial chain, and the company is a leading enterprise in the photovoltaic diamond wire industry. In 2023, the company shipped 128.6643 million kilometers, an increase of 33.81% over 2022, and continued to lead the industry in shipment volume.
2024Q1 achieved operating income of 857 million yuan, a year-on-year decrease of 13.83%, and realized net profit of 195 million yuan to mother, a year-on-year decrease of 48.46%. Affected by industry oversupply and downstream production schedules, the company's profits are temporarily under pressure.
Adhering to R&D technology as the core, extending and structuring the industrial chain, Moat Company is deeply involved in the diamond wire industry. It has always insisted on technology research and development as the core. It has independent intellectual property rights in the core technology, process control, equipment manufacturing, etc. of diamond wire production, and has mastered a full set of core technologies for diamond wire production, including electroplating solution formulations, additives, diamond pretreatment, sanding, online plating treatment, and bus line production. In particular, research and development of busbars is self-made. Currently, the self-power of the company's steel wire busbars has reached 80%, and research and development of tungsten wire busbars is also continuing to advance.
The industry continues to clear up, and tungsten wire opens up room for growth
Since the second half of last year, the price of King Kong wire has declined rapidly. The price of steel wire diamond wire was 20 yuan/kilometer in the first quarter. Looking ahead to the second quarter, due to the cost reduction pressure brought about by the silicon slicing process and the company's active marketing strategy adjustments, the sales price of diamond wire products has maintained a downward trend, but the price reduction has slowed down. We believe that the rapid decline in prices in the industrial chain will help leading companies with cost advantages continue to increase their market share and sort out the industry pattern. However, as the price of King Kong wire gradually bottoms out, the industry is expected to reach an inflection point. The unit price of tungsten diamond wire is higher, and the barriers to bus production are thicker, which is expected to open up new growth space for the company.
Profit forecasting
Considering the current low price of King Kong Wire, the company's profit per kilometer has declined. We expect the company's revenue for 2024-2026 to be 27.7 billion yuan, 32.9 billion yuan, and 4.17 billion yuan, respectively, EPS 1.22, 1.48, and 1.95 yuan, respectively. The current stock price corresponding to PE is 16.0, 13.2, and 10.0 times, respectively. Currently, the price of diamond wire is gradually approaching the bottom area. It is expected that in the future, as the share of tungsten wire gradually increases, the company will achieve a sharp rise in quantitative profit and maintain a “buy” investment rating.
Risk warning
Raw material prices have risen; industry competition has intensified; the risk of product prices will continue to decline; systemic risks in the general market, etc.