Event

Xiexin Integration recently released its 2018 annual report, showing that its operating income in 2018 was 11.191 billion, down 22.54% from the same period last year; its net profit was 45 million, an increase of 89.16% over the same period last year; and its sales gross profit margin was 13.12%, an increase of 1.2% over the same period last year.

In addition, the company released the first-quarter report of 2019 at the same time, with operating income of 2.038 billion yuan in the first quarter, an increase of 0.83 percent over the same period last year, and a net profit of 32 million, an increase of 121.6 percent over the same period last year.

Main points of investment:

Firmly implement the photovoltaic internationalization strategy, overseas markets become the company's strongest performance engine. Under the influence of many factors, such as "531 New deal", "Sino-US Trade friction", "US Act 201" and macroeconomic downturn, the photovoltaic industry fluctuated greatly in 2018. The company properly responded to the operational challenges of the industry, and firmly implemented the "Photovoltaic internationalization Strategy" to achieve component shipments of 4.56GW, of which overseas shipments 2.3GW, overseas business share increased to 52.9%, overseas revenue exceeded 5.924 billion yuan, a substantial increase of 55.48% compared with the same period last year. Looking to the future, with the continuous reduction of the cost of the photovoltaic industry chain, some overseas countries have achieved or close to cheap access to the Internet, the market demand has been stimulated one after another, and the industry is expected to usher in sustainable growth. In this context, Xiexin Integration, which has global brand advantages, will deeply benefit from the growing global photovoltaic market. In 2019, as the company works hard in overseas markets, the proportion of overseas business is expected to further increase to more than 80%, thus becoming the company's strongest performance engine.

"Xin single Crystal" is rising rapidly, reducing costs and increasing efficiency to help access the Internet at a low price. Different from the two traditional technological routes of the photovoltaic industry-ingot polycrystal and Czochralski single crystal, the "Xin single crystal" product (ingot single crystal) developed by Xiexin Group has the dual advantages of high efficiency of single crystal and low cost of polycrystal. To find a new way for the photovoltaic industry to reduce costs and increase efficiency and achieve cheap access to the Internet as soon as possible. In addition, compared with the Czochralski single crystal, the ingot single crystal has lower oxygen content and less light attenuation; therefore, since the launch of Xin single crystal products, the market acceptance and product competitiveness have improved rapidly. With the rapid rise of Xin single Crystal, Xiexin Integration, as a middle and downstream component and integrator, is expected to form a good upstream and downstream linkage effect with Poly Xiexin in the group, which will further help the company build its brand and increase its market share.

Actively promote the second main industry and shape the "Xin" power in the semiconductor field. As the semiconductor industry and the photovoltaic industry belong to two different branches of the silicon industry and have certain technological homology, the company complies with the trend of the semiconductor industry's transfer to China after ploughing photovoltaic for many years. Actively layout the second main business (semiconductor business). At the end of 2018, the company issued a fixed growth plan to raise funds to invest in recycled wafers, C-Si materials, semiconductor crystal drawing furnaces and their parts in the semiconductor industry chain. Chip localization is inseparable from the localization of supporting equipment and key materials. with the expansion of the scale of domestic wafer factories, the demand for matching equipment and materials will also grow rapidly, and the landing of the company's additional projects can not only help the chip localization process, but also effectively thicken their own performance. In addition to this fixed increase project, the semiconductor industry fund (Xinhua Semiconductor) funded by Xiexin Integration at the beginning of 2019 is also an important layout of the company in the semiconductor field, in the future, Xiexin Integration is expected to extend deeply in many aspects such as the integration of semiconductor industry resources with the help of industrial funds, so as to inject "Xin" power into the vigorous development of China's semiconductor industry.

Profit forecast and investment rating: maintain the company's overweight rating. With the continuous decline in the cost of the industrial chain and the approach of cheap access to the Internet, the photovoltaic industry is expected to usher in new growth opportunities. in this context, Xiexin Integration firmly implements the strategy of "photovoltaic internationalization", reducing costs and increasing efficiency at the same time. To ensure that the company's performance is sustained and high-quality development. While striving to strengthen the main photovoltaic industry, the company is also actively laying out the second main business of semiconductors, whether it is the fixed increase project or the establishment of a semiconductor industry fund, all of which show Xiexin's determination to strive for the top in the silicon value chain. In the next few years, the growth logic of photovoltaic + semiconductor two-wheel drive will be the most anticipated point for the company.

As there is still some uncertainty in the implementation of the fund-raising project, based on the principle of prudence, regardless of the contribution of the semiconductor investment project to the company's performance, it is expected that the company will achieve net profit of 1.01,1.26 and 158 million yuan respectively from 2019 to 2021, corresponding to 2019-2021 PE364.84, 290.79 and 232.59 times.

Risk tips: 1) the demand for photovoltaic modules is not as expected; 2) the implementation of the fund-raising project is not as expected; 3) the semiconductor demand is not as expected; 4) the progress of semiconductor product research and development is not as expected; 5) semiconductor customer verification is not as expected.