Key points of investment
The company's performance has been growing steadily, and its profitability has increased dramatically
In 2022, the company achieved operating income of 9.577 billion yuan, an increase of 64.56% over the previous year; net profit of the mother was 401 million yuan; the gross profit margin of sales was 15.63%, an increase of 4.11pct over the previous year, and the net sales interest rate was 4.89%, an increase of 11.98 pct over the previous year. 2023Q1 achieved operating income of 2,708 million yuan, an increase of 34.79% over the previous year; the net profit of the mother was 103 million yuan, an increase of 15.68% over the previous year; and the comprehensive gross profit margin was 17.12%, a decrease of 1.07pct over the previous year. The company's revenue growth in 2022 was mainly due to the rapid development of the global photovoltaic industry. The company further steadily promoted its business layout while accelerating the rise and release of new production capacity.
TopCon battery efficiency broke through, and new production capacity was gradually released. In 2022, the company's module business achieved revenue of 3,033 billion yuan, an increase of 85% over the previous year. The company's battery mass production efficiency has been further improved, and the level of mass production technology and battery conversion efficiency of N-type TopCon batteries are at the forefront of the industry.
The average conversion efficiency for mass production of TopCon11BB main grids reached 24.8%, mass production efficiency of 16BB main grids reached 25.2%, and the conversion efficiency of the cell laboratory certified in April 2023 reached 26.7%. In terms of production capacity, the company has now achieved mass production of the first batch of 4GW in Shanxi, and is speeding up the construction of the remaining 4GW and Phase II 8GW projects in Shanxi.
Backboard shipments reached a new high, and the photovoltaic application system business continued to advance. In 2022, the company's backboard business achieved revenue of about 2,715 million yuan, an increase of 47% over the previous year, and sales of about 247 million square meters. The company completed a project to expand production of 50 million square meters of backboards per year. By the end of 2022, the company had an annual backplane production capacity of 220 million square meters, and the cumulative delivery of backplane products exceeded 210 GW. The company has increased R&D investment in backpanels, and has made technological breakthroughs in environmentally friendly coated backpanels, black highly reflective backboards, and ultra-water-resistant backplates. Furthermore, the company continues to promote the photovoltaic application system business and delivered 1.52 GW photovoltaic power plants to Shanghai Yuanye under the EPC cooperative business. By the end of 2022, it had delivered nearly 2.2 GW of photovoltaic power plants to Shanghai Yuanye.
Profit forecasting and valuation
Profit forecasts were lowered to maintain the “increase in holdings” rating. The company is a leader in backboard and TopCon batteries. Considering that there are many TOPCON expansion projects in the industry in 2023-2024 and that the premium for TOPCON battery module products may decrease, we maintain the company's 2023 profit forecast and lowered the 2024 profit forecast. The company's net profit for 2023-2024 is estimated to be 1,053 billion yuan and 1,359 million yuan respectively (before the reduction was 1,053 billion yuan and 1,562 billion yuan respectively), adding a profit forecast for 2025. The profit was 2,099 million yuan. The corresponding EPS was 0.97, 1.25, and 1.93 yuan/share, respectively, and PE was 14, 10, and 7 times, respectively, maintaining the “increase in holdings” rating.
Risk warning: Battery and backplane production expansion fell short of expectations; industrial chain prices fluctuated greatly; raw material prices rose; market competition increased the risk.