Main points of investment

The decline in shipments led to a drop in revenue, but significantly reversed the loss. In the first half of the year, the company realized operating income of 491 million yuan, a decrease of 13.2% over the same period last year, a gross profit of 31 million yuan, an increase of 122% over the same period last year, and a net loss of 6.4 million yuan in the first half of the year, a substantial reduction compared with a loss of 204 million yuan in the same period last year. The loss per share in the first half of the year was 0.5 cents. The decline in revenue in the first half of the year was mainly due to a decline in wafer shipments compared with the same period last year, while the sharp turnround was mainly due to an increase in gross profit margin and a sharp decline in administrative expenses and prepayment impairment losses.

Expanding new customers led to a decline in wafer shipments in the first half of the year. The company's wafer shipments in the first half of the year were 166.2MW, down 16% from the same period last year (first half of 2015: 197.7MW), mainly because the company tried to expand new customers in the first half of the year, while new customers generally need to send samples and certification in advance, which usually takes 1-2 months, which affects the company's normal shipments. Previously, the company's main customers are high-end customers, including Japan's SunPower, but since then the company hopes to expand some of its domestic medium-and high-end customers, such as Zhonglai shares. It is expected that with the smooth completion of the certification, shipments will rise steadily and return to a reasonable level in the second half of the year.

The gross profit margin has been effectively improved and profitability has been improved. The biggest highlight of the company's performance in the first half of the year was the effective rebound in gross profit margin, which rebounded from 2.5% in the same period last year to 6.3% in the first half of this year, mainly because the company signed an agreement with two suppliers at the beginning of the year. One of them agreed to waive the minimum freight volume and purchase price previously signed, while the other agreed to reduce the purchase price previously signed. Coupled with the fact that this long order will be completely completed by the end of the year, and the commissioning of the Malaysian factory, we expect the company's gross profit margin to stabilize within the 10% 15% range in the future, and profitability will rise sharply.

Our point of view: Camdanke Solar Energy (712.HK) is a leading manufacturer of single crystal silicon wafers in China. Its efficient single crystal silicon wafers have been supplied to overseas high-end customers for a long time, with a conversion efficiency of 25%. At present, the company is actively expanding into the service, construction and operation of downstream power stations, while the company's plant in Malaysia has been put into production, and we look forward to the continued increase in gross profit margin of the main business after the conclusion of the long-term contract with suppliers at the end of 2016. Profitability has improved. The company has significantly reduced its losses in the mid-2016 report and expects its full-year results to be near the break-even point and will be profitable in mid-2017. Investors are advised to pay attention to the progress of the company's downstream business development and the profitability of the Malaysian factory.

Risk hint: product sales are not as expected and prices are down.