Core views:
The steady performance was in line with expectations, and gross margin increased month-on-month. The company released its 2024 quarterly report. In 24Q1, it achieved revenue of 4.510 billion yuan, +25.28% year on year, net profit to mother of 1,070 billion yuan, +20.65% year on year, net profit after deducting non-return to mother of 1.02 billion yuan, +26% year over year. The overall performance was in line with expectations. In terms of profitability, the gross profit margin was 43.52%, +2.91/+2.94 pct, respectively; the net profit margin to mother was 23.72%, and -0.91pct/+0.64pct, respectively. The year-on-year increase in cost ratios was mainly affected by the increase in R&D personnel.
Full orders for equipment in hand guarantee annual performance. By the end of 24Q1, the company's contract debt was 10.3 billion yuan, down 4.15% from the end of 2023. According to the company's 2023 annual report, orders for equipment in hand (tax included) as of the end of 23 billion yuan, of which 3.27 billion yuan was for semiconductor equipment, equivalent to 2.2 times the company's equipment and service revenue in '23 (12.8 billion yuan). Full on-hand orders can guarantee the company's annual performance.
Materials business: Crucible prices are expected to remain stable in the short term, and silicon carbide substrates will continue to be fully shipped. In terms of crucibles, the supply and demand status of high-purity quartz sand products across the country has recently shown a weak and stable market situation. Prices of high-purity quartz sand for photovoltaic crucibles have declined, and the relationship between supply and demand in the market has remained stable for the time being. It is expected that for some time to come, domestic high-purity quartz sand products will maintain a weak and stable market situation, and crucible prices are expected to remain stable. In terms of silicon carbide substrates, the company has achieved mass production and sales since this year, and the quality has reached the leading level in the industry. Shipments are expected to continue to be full.
Profit forecasting and investment advice. We expect the company's net profit to be $57.68/67.69/7.860 billion yuan in 2024-2026, and EPS of 4.40/5.17/6.00 yuan/share. The company was given 10 times PE in 2024, corresponding to a reasonable value of 44.04 yuan/share, maintaining a “buy” rating.
Risk warning. The expansion of photovoltaic and semiconductor silicon wafers fell short of expectations; the semiconductor localization process fell short of expectations; and the penetration rate of silicon carbide fell short of expectations.