Summary of the report
A view different from that of the market:
In the first half of the year, most of the market views on the photovoltaic sub-industry are pessimistic, mainly because of the expected slowdown in installation growth and the reduction of feed-in electricity prices. And our view is different from the market, the view of the photovoltaic industry is optimistic, the main reasons are as follows: first, although the growth rate of photovoltaic installation slows down, it is limited to ground power stations, and the growth rate of distributed power stations during the 13th five-year Plan period is still worth looking forward to. From the policy of subsidies for distributed power stations this year, we can see that the country has an obvious policy tilt towards distributed photovoltaic. At the same time, the local governments for distributed subsidies should not be underestimated, we expect the market space for distributed photovoltaic is huge, it is suggested to focus on.
Second, the overseas market space is huge, under the historical background of "Belt and Road Initiative", it has brought new opportunities for China's photovoltaic enterprises to go out. At present, China's photovoltaic production capacity has accounted for 70% of the world, the scale effect is prominent, and there are obvious advantages in price and quality. In the future, Chinese photovoltaic enterprises will further expand their overseas layout and their global influence will be further strengthened.
Third, the reduction of photovoltaic grid electricity price is a certain thing, which has been expected and digested by the market at present. The decrease in the cost of each product caused by the progress of photovoltaic technology is beyond expectation. The market will be further divided, survival of the fittest, for high-quality enterprises, gross profit margin does not decline but rise, stand out.
Highlights of the company's investment:
With the transformation of power plant operation, electricity revenue has become the main growth point. In every link of the photovoltaic industry chain, the gross profit of power station operation is the highest, and the average gross profit margin of the industry is nearly 60%. Touri Xinneng strategically actively laid out the construction and operation of the power station, and the company's electricity revenue reached 203 million in 2016, nearly double that of the same period last year. It is estimated that by the end of 2017, the company's own grid-connected power station will reach 400-500MW, and electricity revenue will become a new growth point for the company. The company plans to expand the ground power station to 1GW, which provides a strong support for the company's long-term and stable development.
With the gradual expansion of EPC business, the advantage of cost control is obvious. Relying on the company's ten years of experience in designing, installing and operating photovoltaic power stations, the company has a competitive EPC construction cost advantage, of which 70% and 80% of the cost can be controlled by the company itself. The company vigorously expanded its EPC business in 2017, seizing the market opportunity and strengthening the momentum for further development. It is expected that by the end of 2017, the company's EPC will reach 60MW, a fivefold increase over the same period last year.
Low leverage against risk, with great potential for expansion based on accumulated strength. The company's steady and low-leverage development route makes it have a very strong anti-risk ability, which accumulates strength for the next step of the company's power station development, the company has sufficient funds, full stamina, strength and potential can not be underestimated. The company uses local industries such as Qinghai, Shaanxi and Kashgar to drive the construction of local power stations and has an absolute advantage in land acquisition. The company rises abruptly based on its accumulated strength, and its performance is expected to break out.
There is no double reverse in overseas business, and the revenue from payment to delivery is steady. The company's solar appliances and solar collectors are mainly sold to 81 overseas countries, with 31 cooperative supermarkets. The company can achieve nearly 40 million of sales revenue every year, and few domestic enterprises are involved in this field. This kind of business has a high gross profit margin (21.24% of the company's solar application products and 42.22% of solar collectors in 2016), and is not affected by Europe and the United States, so it supports the company's performance very well.
Profit Forecast:
As of July 28, 2017, the company's closing price was 4.45yuan and the total market capitalization was 5.502 billion yuan. The corresponding EPS from 2017 to 2019 was 0.19,0.29,0.36, and the corresponding PE was 22 times, 15 times and 12 times, respectively, which was lower than the industry average. We believe that the company's whole industry chain business model lays a solid foundation for the company's sound and long-term development, and the low-leverage financial structure provides financial support for the company's further expansion, which can achieve steady counter-cyclical growth. In addition, the company's cost control ability and anti-risk ability also protect the next step of the development of the company, the future does not rule out the possibility of becoming bigger and stronger. Cover for the first time to give a "buy" rating, with a target price of 6.5 yuan.
Risk Tips:
Government photovoltaic policy risk, the company's power plant business growth is not up to expectations.