Incident: The company released its 2022 annual report. The company achieved operating income of 30.94 billion yuan in 2022, an increase of 185.64% over the same period last year; net profit attributable to shareholders of listed companies was 19.121 billion yuan, an increase of 234.06% over the same period last year. Net profit attributable to shareholders of listed companies after deducting non-recurring profit and loss was 19.149 billion yuan, an increase of 235.55% over the same period last year.

The volume and profit of silicon materials have risen sharply, and the company has achieved both revenue and profit growth. The main reason for the sharp increase in the company's revenue during the reporting period is that since 2022, the overall photovoltaic market has continued to grow. Since 2022, downstream demand has been strong, the high-purity silicon market has continued to be tight, and supply and demand are tight, leading to a 61.62% year-on-year increase in sales prices over the same period last year. In addition, the company's Phase III B project reached production at the beginning of the year, and the release of new production capacity drove a 76.37% year-on-year increase in sales volume. Overall, the company's cost advantage was obvious. The company's cost advantage was obvious. In 2022, the company's production and sales were booming, achieving production of 133,800 tons of polysilicon and 132,900 tons of sales respectively. At the same time, product quality remains at a high level, monocrystalline silicon wafers account for more than 99% of materials, and mass sales of N-type high-purity silicon materials have been achieved, which has been verified by mainstream downstream customers.

The enterprise has significant cost advantages, leading the industry in product quality. In terms of cost control, the company uses digital, automated and intelligent management to improve efficiency, reduce procurement costs through large-scale reduction of labor costs, strict control of procurement processes, and reduction of raw materials and energy consumption by improving production processes. Through a series of methods such as establishing an optimized capital structure, a strict cost management system, and a perfect operating mechanism, the company's costs and expenses have been kept at a low level in the industry for a long time and have strong competitiveness. In 2022, the company's polysilicon sales cost dropped significantly from 75.21 yuan/kg to 58.48 yuan/kg. The average annual sales cost was 58.56 yuan/kg, and the gross margin was as high as 74.69%, an increase of 9.14 percentage points over the previous year. In terms of quality, the company continuously reduces the content of surface metal impurities and improves product purity and stability through fine management. In 2022, the company's single-crystal output ratio reached more than 99%. Among them, more than 99% of products reached the electronic grade 3 level, and more than 90% of the products reached the electronic grade level, far exceeding the index requirements of the “Solar Grade Polysilicon” (GB/T25074-2017) premium product national standard, which is at the forefront of the industry.

Investment suggestions: The development of new energy sources such as photovoltaics has become a global consensus. The company is a leading photovoltaic polysilicon enterprise and has an important position in the industry chain. As the supply of polysilicon continues to be released, prices are expected to return rationally, and the company's new production capacity will continue to be released, and excellent performance can still be released. We expect that in 2023-2025, the net profit of the mother will be $135.8, 91.2 and $8.64 billion, respectively, the corresponding EPS will be 6.35, 4.27 and 4.04 yuan/share, and the corresponding PE will be 7.7, 11.5 and 12.1 times, maintaining the “buy-A” investment rating.

Risk warning: risk of high customer concentration; risk of high supplier concentration; risk of safe production, etc.