Key points of investment

Incident: On the evening of April 21, the company released its 2022 annual report.

Revenue in 2022 fell about 17% year on year, and performance turned a loss into a profit

In 2022, the company achieved revenue of about 900 million yuan, down about 17% from the previous year, and achieved net profit of 26 million yuan to the mother, an increase of about 156% over the previous year, turning a loss into a profit. The decline in revenue was mainly due to delays in the delivery of the company's products and confirmation of revenue due to domestic and foreign conditions. Looking at the fourth quarter alone, the company achieved revenue of about 342 million yuan, an increase of 65% over the previous year, and achieved net profit of about 25 million yuan to the mother, an increase of about 132% over the previous year.

The gross profit margin and net interest rate in 2022 were 22% and 3% respectively, up about 6.9 and 7.2 pct from the previous year. In 2022, the company achieved gross profit margin of sales and net interest rates of 22% and 3% respectively, up about 6.9 and 7.2 pct, respectively. The increase in gross margin is mainly due to 1) order optimization, which is more inclined to seek order products with relatively high gross margin levels; 2) the growth of equipment upgrade business with higher gross margins. The increase in net interest rate was mainly due to a sharp decline in impairment losses compared to the same period in 2021 after repayments and order quality were improved.

In-hand orders are sufficient. Revenue from on-hand orders of about 1.2 billion yuan has not yet been confirmed. The main business development momentum is strong. According to the company announcement, the company expects TopCon battery production to expand by more than 200 GW in 2023. Optimistic estimates are expected to be close to 300 GW, and downstream demand for photovoltaic automation equipment is strong. We expect TopCon batteries to peak in 2023-2025, and the average annual expansion of production is expected to exceed 200GW. As a domestic leader in photovoltaic automation equipment, the company actively lays out technological innovation in the field of TopCon batteries. As of the review date of the 2022 annual report, the amount of orders on hand for which the company has not yet confirmed revenue is about 1,217 billion yuan, a significant increase over the previous year. In the future, as orders are gradually delivered and new projects continue to increase, it is expected that the main business development momentum will be strong.

It is proposed to set up a R&D and manufacturing center for heterogeneous copper electroplating equipment in Nantong. The copper electroplating mass production process is expected to accelerate and the copper electroplating project will continue to advance. The preliminary results of the second phase of verification have generally performed well, and efforts will be made to successfully build the industry's first high-capacity copper grid heterojunction battery production line in the third quarter. A graphic project has already been set up, and innovative development will continue to be pursued in the future. Furthermore, the company plans to invest 1 billion yuan to set up a wholly-owned subsidiary in Nantong to build a R&D and manufacturing center for heterojunction copper electroplating equipment. The mass production process for copper electroplating projects is expected to accelerate.

The layout of optical chips continues to advance. FikonTec has introduced new investors to increase capital to acquire 7.36% of the German target's shares, and AI development has boosted demand for computing power, and demand from FiConTec, a global leader in optical module sealing and testing equipment, is expected to increase. The company's participating company, Fikontech, introduced a new investor, Nantong Nengda, to increase its capital by 120 million yuan to acquire 7.36% of the shares of German target companies (FAG and FSG). After completing the aforementioned acquisition, Fikontech will hold about 93% of the shares of the German target company. After all aspects of the company are met, restarting the restructuring is expected to increase the company's valuation.

Profit forecasting

The company's net profit for 2023-2025 is estimated to be 1.2, 210, and 250 million yuan respectively. 2023-2025 will increase 343%, 79%, and 21% year-on-year, corresponding to PE 56, 31, and 26 times. As a leader in high-end automation equipment, the company is expected to increase its two-wheel drive performance and maintain its “buy” rating in the future.

Risk warning

1) New technology expansion fell short of expectations; 2) Acquisition progress fell short of expectations.