Event: the company announced the signing of a major contract and is expected to sell 70,000 tons of high-purity silicon raw materials to Trina Solar from 2023 to 2026. If calculated according to the current market price (based on the average price of polysilicon material newly released by PVInfoLink), the total sales are expected to be 21.21 billion yuan, with an annual average of 5.3 billion yuan. The company achieved operating income of 136yuan and 6.5 billion yuan respectively in 2021 and 22H1.
Comments:
Benefiting from the rapid increase in demand, the silicon industry has maintained a high boom. With the rapid heating up of downstream photovoltaic terminal demand, the production capacity of each link of the industrial chain is actively expanding. As the upstream link of the industrial chain, high-purity silicon has larger investment scale, longer production cycle and slower capacity release. Since the second half of 2020, as the supply of high-purity silicon continues to be tight, the price continues to rise. 2020.5.29, the spot price of domestic polysilicon (grade I material) has risen from 8.1 US dollars / kg to 2022.9.13 to 44.5 US dollars / kg, an increase of 449 per cent. Silicon supply may continue to increase in the future, but strong downstream demand is still expected to support the tight balance between supply and demand in the industry, thus promoting high prices.
Invigorating polysilicon assets has become an important profit growth pole. In 2021, the company will seize the favorable opportunity of insufficient structured supply of polysilicon in the industry to firmly promote the implementation of technical transformation and resumption of production of polysilicon production lines and invigorate effective assets. With the smooth resumption of polysilicon production in the first quarter of 2022, the company's current production capacity is 10,000 tons / year of high-purity polysilicon. After the resumption of production, high-purity silicon quickly entered the industry by relying on product quality and market reputation, such as Tianhe, Jingke, Ates, Gaojing, Shuangliang energy saving and so on. Electronic grade high purity silicon densifier has met the requirements of N-type battery customers, and the market competitiveness is prominent. In the first half of 2022, the company's operating income from solar energy and other businesses totaled 1.434 billion yuan, an increase of 225.49%; a gross profit of 33.7%, an increase of 18.0 pct; and a net profit of 282 million yuan, a substantial increase over the same period last year, mainly from the contribution of polysilicon products.
Crystal silicon production capacity is actively expanding, is expected to continue to thicken performance. Based on the overall consideration of the market environment, the industry development trend and the group's overall industrial development plan, the company plans to implement a 50,000 ton high purity silicon project in Haixi Prefecture, Qinghai Province, in order to stabilize and enhance its competitiveness in the high purity silicon market. At present, the preliminary top-level design of the project has been completed, and the construction period is 20 months. after completion, it is expected to achieve an average annual sales income of 3.389 billion yuan and an average annual net profit of 863 million yuan. It is estimated that the payback period of the project investment (after income tax) is 5.19 years, and the financial internal rate of return (after income tax) is 28.64%. The signing of the contract with Trina Solar Energy to match the company's capacity planning is conducive to the stable sales of high-purity silicon products and is expected to have a positive impact on future business performance.
Earnings forecast and valuation rating: as this contract has not yet been executed, we do not consider the relevant performance increments and maintain the company's EPS to 0.66,0.90 and 1.05 yuan in 22-24 years. Optimistic about the future glass industry out of the bottom and the company's long-term growth attributes, maintain the "buy" rating.
Risk hint: the glass price rebounded less than expected, the progress of product promotion and project construction was not as expected, and the implementation of this contract was not as expected.