Incident: On April 26, 2023, the company released the 2022 report and the first quarter report of 2023.

In 2022, the company achieved revenue of 9.577 billion yuan, an increase of 64.56% over the previous year; achieved net profit of 401 million yuan, an increase of 228.09% over the previous year, turning a loss into a profit: net profit after deducting non-return to the mother was 279 million yuan, an increase of 176.15% over the previous year, turning a loss into a profit.

In the first quarter of 2023, the company achieved revenue of 2,708 million yuan, an increase of 34.78% over the previous year: it achieved net profit of 103 million yuan, an increase of 15.68% over the previous year, and achieved net profit of 126 million yuan after deducting non-return mother's net profit, an increase of 62.09% over the previous year. Comment: Zhejiang Energy Electric took the lead, and the company entered a new era. During the reporting period, in February 2023, Zhejiang Electric Power completed the acquisition of control of Zhonglai shares, and the actual controller of Zhonglai shares was changed to the Zhejiang Provincial State-owned Assets Administration Commission. The consideration for this control acquisition was 17.18 yuan/share, anchoring the long-term value of Zhonglai shares. The entry of Zhejiang Power has brought two major collaborations to the company: 1) Obtaining operating capital. As a subsidiary of Zhejiang Energy Electric Power, the company can share the credit lines of the entire Zhejiang Energy Group to solve the capital problems that are urgently needed to achieve production capacity in its various businesses: 2) Sales channel collaboration. The parent company of Zhejiang Energy Electric Power and its brother companies are potential big customers.

TopCon's production capacity was implemented at an accelerated pace, and another breakthrough in conversion efficiency was achieved. The company accelerated the construction of the “16 GW High Efficiency Single Battery Smart Factory Project” in Shanxi and the rise in production capacity. As of April 2023, the first batch of 4GW of the first phase of the project has reached full production. The construction of the first phase of the subsequent 4GW and the second phase of 8GW is progressing in an orderly manner, and the commissioning progress is expected to exceed expectations. In April 2023, on the basis of its self-developed TopCon3.0-PopAid technology and 182 batteries, Zhonglai achieved a laboratory conversion efficiency of 26.7%, setting a new world record for the current N-type TopCon battery. This increase in battery efficiency also set a new record after announcing that the highest efficiency reached 26.1% in November 2022, after a lapse of less than half a year. This lays a solid foundation for the company to achieve mass production of 3.0 technology as soon as possible.

Patek Precision became a practitioner of the company's POPAID technology path, and technology spillover effects were evident. In April 2023, the company signed an agreement with PaiDa Precision to jointly invest in the construction of the “13.5GW Solar Cell Project with an Annual Output”. The company provided comprehensive technical support services for the entire planning, design, construction and commissioning of the project. This collaborative project is an important indication that the maturity of TopCon-PopAid technology developed by China has been recognized by the market and that technology has spillover. Maintaining the “buy” rating: According to the business split and profit forecasting model, we expect the total revenue of the company to be 201.53/308.77/38982 billion yuan in 2023-2025, respectively, and the net profit returned to the mother is 1,231/20.34/2,209 billion yuan respectively. The current stock price corresponds to PE 12.7/7.7/7.1 times, respectively. The company's growth is driven by technology. As advanced production capacity continues to be put into operation, we are optimistic that the company's future performance will accelerate and maintain the “buy” evaluation under the three-wheel drive of the backplane, battery and module, and distributed photovoltaic system business level.

Risk warning: risk of PV installation demand falling short of expectations; risk of production capacity not being released as expected; risk of large fluctuations in industrial chain prices; risk of information used in research reports not being updated in a timely manner, etc.