Quartz Shares 2021 Third Quarter Report Review and Conference Call

The company announced the third quarter report of 2021, achieving revenue of 679 million yuan, an increase of 44.56% year-on-year, net profit attributable to the mother of 175 million, an increase of 17.77% year-on-year, and net profit after deducting non-deduction of 162 million, a substantial increase of 78.70% year-on-year, in line with market expectations. Among them, Q3 achieved revenue of 238 million, an increase of 48.27% year-on-year, and net profit attributable to the mother of 62.78 million, an increase of 126.70% year-on-year.

From the perspective of the company's business segments, we estimate that the revenue of traditional light sources, photovoltaic high-purity quartz sand and semiconductor quartz products in Q3 is about 0.8, 0.7 and 0.4 billion respectively (an increase of 25%, 80% and 60% respectively year-on-year). We believe that the company's current import substitution in the field of semiconductors and photovoltaics is already in the way, and the performance elastic release superimposed valuation reshaping has just begun! We maintain a net profit forecast of 255 million and 430 million yuan for 2021-2022, corresponding to 39 times pee in 2022, and maintain key recommendations!

1) The impact of limited electricity on revenue growth

The company achieved revenue of 238 million yuan in the single quarter of Q3, which was basically flat compared with 233 million yuan in Q2, but considering that the price increase of Q3 photovoltaic products has been gradually reflected, the actual sales volume of Q3 has decreased slightly from Q2. We believe that this is mainly due to the impact of the company's Q3 power ration, the company's main quartz tube forced to reduce the electricity load, resulting in some september sales delays, is expected to affect the company's revenue of more than 10 million to 20 million.

2) The optimal link of the competition pattern of the photovoltaic industry chain, high-purity quartz sand, continues to increase significantly, import substitution is already in the way, and price increases are in full swing

In the first three quarters of 2021, the company actively expanded the original production capacity in the case of 20,000 tons of investment projects that have not yet been put into production, and we estimate that the revenue of high-purity quartz sand in the first three quarters reached about 180 million, a substantial increase of 80% year-on-year, and established a stable business relationship with LONGi shares in the photovoltaic industry, JA Technology, etc.

We believe that the company's 20,000 tons of high-purity quartz sand project is expected to be put into production in small batches at the end of 2021, and fully put into production in the first quarter of 2022, which is expected to solve the company's production capacity bottleneck; at the same time, the recent U.S. U.S. U.S. strong demand in the domestic photovoltaic industry has begun to raise prices by 20-30%, we estimate that the company's Q3 began to gradually raise prices for different customers by 10-20%, and it is expected that the subsequent volume and price will rise together.

3) Semiconductor certification has gradually passed, and the performance explosion has begun

We estimate that the company's semiconductor revenue in the first three quarters was about 120 million, a substantial increase of more than 70% year-on-year, and it is expected that the annual semiconductor revenue will reach more than 160 million, doubling the growth; of which TEL and LAM are expected to contribute half of each, with the landing of TEL etch certification in the second half of the year, shipments are expected to continue to increase. The company's 6,000 tons of electronic grade quartz products 18 lines of projects have been completed and put into operation, and all projects are expected to be put into operation before October 2022.

4) The product structure is high-end, and the gross profit margin has entered the upward channel

We believe that with the increase in the proportion of the company's semiconductor and photovoltaic high-end products (mainly photovoltaic high-purity quartz sand, sales volume has expanded significantly, diluted fixed costs, gross profit margin of 50%+), the company's Q3 gross profit margin increased by 5.69% and 2.78% to 47.96% respectively year-on-year. However, due to the impact of Q3 power curtailment and production rationing, some production capacity and electronic grade quartz 6 production lines were put into operation and consolidated, and the management expenses increased by 3.5 percentage points month-on-month, and the net profit margin increased by 9.11 percentage points year-on-year to 26.33%.

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