\u3000\u3 Guocheng Mining Co.Ltd(000688) 556 Qingdao Gaoce Technology Co.Ltd(688556) )
Event: on May 20, 2022, the company issued a prospectus for convertible bonds.
Key investment points
The gross profit margin of 2022q1 diamond line (including photovoltaic and innovation business) was 48%, which was much higher than expected, and the production capacity increased by 5 times, realizing the high increase of diamond line profit: (1) from the perspective of revenue: the company’s 2022q1 diamond line revenue was 170 million yuan, a year-on-year increase of + 152%, mainly due to the implementation of technical transformation in 2021, with the production capacity increased from 5.4 million km in 2020 to 11 million km in 2021, and the production capacity of 2022q1 was 7.12 million km (28 million km annualized), which was 5 times higher than that in 2020. (2) From the perspective of gross profit margin: from 2019 to 2021, the gross profit margin of the company’s diamond line business was 32.5% / 31.3% / 36.5% respectively, with a year-on-year increase of + 1.3pct / – 1.2pct/5.3pct respectively, showing a fluctuating upward trend as a whole; The gross profit margin of 2022q1 diamond line was 47.6%, a year-on-year increase of + 11.1pct, mainly because the unit cost decreased faster than the unit price: the unit price of 2022q1 diamond line was 35.7 yuan / km, a year-on-year increase of – 16%; The unit cost was 18.7 yuan / km, a year-on-year increase of – 31%.
Lower energy price & after the technical transformation, the manufacturing cost decreased, and the unit cost of the company’s diamond line decreased rapidly: (1) lower energy price: in 2020, the company relocated the diamond line production line from Qingdao to Shanxi Changzhi, where the energy cost is lower. The average unit price of power purchased by the company decreased from 0.8 yuan / kwh in 2019 to 0.6 yuan / kwh in 2020, and further decreased to 0.39 yuan / kwh in 20212022q1. (2) Scale effect brought by technological transformation: the company implemented technological transformation in 2021 (from 6 lines of one machine to 12 lines of one machine), and the production capacity was increased by 5 times compared with that in 2020. The scale effect significantly reduced the manufacturing cost amortized per unit product, and the gross profit margin increased from 31% in 2020 to 36.5% in 2021. The cost side of 2021 had the impact of technological transformation cost, the impact of 2022q1 technological transformation cost disappeared, and the gross profit margin increased to 47.6%.
From the perspective of supply and demand, we do not rule out the possibility that the company will continue to increase the production capacity of diamond wire: the consumption of 36 diamond wire corresponding to the shipment of single GW of silicon wafer is about 500000 km, that is, the current production capacity of Qingdao Gaoce Technology Co.Ltd(688556) of 28 million km corresponds to the shipment of 56gw silicon wafer, while the chip OEM planned by Qingdao Gaoce Technology Co.Ltd(688556) is 47gw. In the long run, the existing production capacity of diamond wire is basically only self-produced and sold, We judge that the production capacity of diamond line in the future does not rule out the possibility of further increase.
Equipment orders are full, and the basic price is growing steadily: by the end of March 2022, the company’s cutting equipment orders in hand are about 1.25 billion yuan (including tax, including about 1.19 billion yuan of photovoltaic cutting equipment in hand, an increase of 40% over 850 million yuan at the end of 2021; innovative business equipment is about 60 million yuan), ensuring the growth of performance.
Specialized division of labor improves the efficiency of the industrial chain, and there is a strong demand for chip OEM: (1) in terms of chip OEM capacity, the company previously planned a total capacity of 35gw. Due to the strong downstream demand, the total planning of 12gw was raised twice in April 2022, and the current capacity planning is 47gw. If the subsequent price reduction of silicon wafers is fully considered, we estimate that the steady-state profit of single GW is 20 million yuan, and the profit of 47gw is over 900 million yuan. (2) In terms of demand, the company has signed agreements with Tongwei Co.Ltd(600438) , Meike, Beijing Jingyuntong Technology Co.Ltd(601908) , sunshine energy, Jiangsu Akcome Science And Technology Co.Ltd(002610) and other companies, and the agreed annual production scale of silicon wafer has exceeded 15gw.
Profit forecast and investment rating: considering the epidemic and other force majeure special factors, we expect the net profit attributable to the parent company in 20222024 to be RMB 440 / 710 / 940 million respectively, and the corresponding PE to be 32 / 20 / 15x respectively, maintaining the “buy” rating.
Risk tip: the industry is affected by policy fluctuations, and the business expansion is less than expected.
