Investment highlight
Covering quartz shares (603688) for the first time to give the outperform industry rating, the target price is 151.00 yuan, corresponding to 23 25x/18xP/E 24e, for the following reasons:
In 2023, the photovoltaic grade high purity sand still has a gap between supply and demand, and the inner layer is scarce or clearer. We believe that there will still be a β market boost for high purity sand in 2023, and according to our estimates, the inner / middle and outer layer demand is 39,000 million tons respectively. On the supply side, we comprehensively consider: 1) the new overseas supply is limited; 2) the rhythm of domestic production expansion is mainly controlled by quartz shares, and it is estimated that the inner / middle and outer layer supply is about 33,000 tons. Considering that the production capacity of other domestic enterprises is uncertain, but it may be mainly used in the middle and outer layer rather than the inner layer, we think that the certainty of sand scarcity in the inner layer is stronger, and sand prices may have further upward momentum.
The company is a domestic high-purity sand pathfinder, with high-quality resources and excellent purification skills. We believe that there are two barriers to high purity sand: one is the quality of ore sources, which is a prerequisite. If the mineral products are not good, it is difficult for enterprises to rely on acquired processing technology to make up for it. At present, high-quality deposits in the world include North American Spruce Pine Mine and Indian Mine. The former is locked by Unimin and TQC, while the latter's main ore is locked by quartz shares. The second is the purification technology, enterprises need to polish the purification process matched with the ore source. Through years of technical reserves, quartz shares have core patents in key links. We believe that the company locks the ore source in advance and accumulates supporting purification processes, which is better in the progress of production expansion, that is, to enjoy the relative advantage of increased quantity; at the same time, we expect domestic high-purity sand to maintain a tight balance between supply and demand in 2023 and relatively moderate supply tension in 2024, but the price center is still expected to maintain a relatively high level compared to the historical level (before 2021).
Quartz materials focus on the field of semiconductors and strive to achieve a breakthrough from "1" to "N". The company's quartz material products include rods for light sources, optical fibers and semiconductors. Among them, the certification barriers and unit value in the semiconductor field are higher. At present, the company has passed the certification of TEL electronic diffusion link and LAMResearch etching link, and AMAT is still in the process of making phased progress, which will help it to break through the international semiconductor customer chain. Compared with Filihua, the product layout of the company is more perfect, but the volume is in the initial stage of development. We expect that with the increase in the contribution of the company's 6000 tons of electronic products, its quartz tube business is expected to enjoy a steady increase in sales and unit value.
What is the biggest difference between us and the market? We believe that quartz race road has both resources and purification barriers, so there is no need to be too pessimistic about the sustainability of the company's advantages and the price of quartz sand.
Potential catalyst: after the photovoltaic demand picks up, the price of quartz sand still has room to rise.
Profit forecast and valuation
We estimate that the company's 22-year 24-year EPS will be 2.83,6.09,8.41 yuan respectively, and the CAGR will be 72%. The current stock price corresponds to the 24-year 21x/16x 21x/16x E, respectively. We cover quartz shares for the first time and give the industry a rating of outperforming industry, with a target price of 151yuan, corresponding to 23max 24e 25x/18xP/E, implying 16% upside space.
Risk.
The quartz mine supply chain is stable, the company's production expansion progress is not as expected, and the overseas production expansion progress is higher than expected.