Key points of investment
Performance was on the upper end of the forecast, with material revenue accounting for about 20%. The 2023Q1 company's revenue was 3.60 billion yuan, +84% year on year; net profit of 890 million yuan was 890 million yuan, which was in the upper limit of the performance forecast range of 800 to 900 million yuan, +100% year on year; net profit after deducting non-return to the mother was 87 million yuan, +102% year on year. We expect materials revenue to account for 20% of about 700 million yuan. According to the 30% net interest rate, the corresponding net profit is about 210 million yuan. The rest is equipment contributing to performance.
Profitability is relatively stable, and investment in R&D continues to increase. The gross margin of 2023Q1 company was 40.6%, +0.7pct year on year, net interest rate was about 28.1%, +4.5pct year on year, mainly due to an increase in government subsidies; the cost rate for the period was about 10.6%, the year-on-year +1.5pct, of which the sales expense ratio was about 0.4%, -0.1pct year-on-year, and the management expense ratio (including R&D) was 10.43%, with a year-on-year ratio of +1.6pct, where the R&D cost ratio was about 8.1%, +2.6pct year on year, the financial expense ratio was about -0.3%, the same as the previous year.
Contractual liabilities & inventories have soared, and we expect new orders to be signed in Q1 at around 4.7 billion yuan. As of the end of 2023Q1, the company's contract debt was 10.21 billion yuan, +84% year on year, +8% month on month, inventory was 13.96 billion yuan, +72% year on year, +13% month on month. By the end of 2023Q1, the company had not completed contracts for crystal growth equipment and intelligent processing equipment totaling 26.06 billion yuan (tax included), +2.5% month-on-month. Of these, semiconductor equipment contracts were not completed at 3.52 billion yuan (tax included), +3.8% month on month. We expect new orders to be signed in 2023Q1 about 4.7 billion yuan, +7% year on month, -10% month on month. The net cash flow from 2023Q1 operating activities was 430 million yuan, +158% year on year, and the repayment situation was good.
Photovoltaic equipment: Single crystal furnace basic plate stabilized+cell equipment & module equipment order target of 3 billion new orders in 2023. (1) Single crystal furnace: In the future, downstream silicon wafer mills will expand production to 100GW+. At the same time, after silicon prices are reduced, the advantages of advanced production capacity will be fully highlighted. Backward production capacity will be eliminated, and fifth-generation monocrystalline furnaces will help improve battery efficiency. (2) Battery and module equipment: The target is to sign a new order of 3 billion yuan in 2023. PECVD equipment has already been introduced to the market, and tiled module equipment has been deployed for many years and continuously iterated according to customer requirements.
Semiconductor equipment: Power semiconductors and advanced manufacturing processes have all introduced new equipment to seize market opportunities. The growth of silicon carbide epitaxial equipment is impressive in 2023. New products (6-inch two-chip silicon carbide epitaxial equipment) will be released in February, and new equipment will continue to be released around the silicon carbide field; new equipment will be launched in advanced process fields according to strategic plans; and a pilot line for diamond crystal growth using the MPCVD method for fourth-generation semiconductor materials will be built in 2023.
Materials: Target material revenue to reach 5 billion yuan by 2023. Material revenue in 2022 was 1.45 billion yuan, mainly crucibles and sapphires; the 2023 revenue target is 5 billion, mainly quartz crucibles, sapphires, diamond wire, and silicon carbide. (1) Quartz crucibles: In 2022, Jingsheng's industry had the highest market share. Crucible shipments will continue to grow sharply in 2023 and continue to lead the industry. The Ningxia base is actively expanding production, and is expected to produce 2-3 million units per month in the second half of 2023. (2) Diamond wire: The technology of replacing high-carbon steel wire with tungsten wire is feasible. Theoretically, there is not much difference in cost between the two technologies. Tungsten wire is the future development direction. (3) Silicon carbide substrate: The company has grown 8-inch crystals, and 2023Q2 will be produced in small batches.
Profit forecasting and investment ratings: PV equipment is the first curve of Jingsheng Electromechanical, the second curve is the amount of semiconductor equipment released, and the third curve is the complete release of photovoltaic consumables and semiconductor consumables. We maintained the company's net profit of 47/58/7 billion yuan in 2023-2025, and the corresponding PE was 19/15/13 times, maintaining the “buy” rating.
Risk warning: Downstream production expansion falls short of expectations, and new product expansion falls short of expectations.