Main points of investment:

The company has a strong successor to turn losses into profits.

At the same time, the company uniquely has 1) rich experience in market development and industry competition of photovoltaic modules, and 2) the dual competitive advantage of TOPCon cells + large-size components, which is expected to occupy a favorable position in the future industry competition. After two years of losses in 2020-21, the company realized a net profit of 59 million yuan in 2022, turning losses into profits. The reason for the loss is mainly due to the fact that the company has gradually eliminated a large number of old battery chips and components, and made provision for a large number of impairment provisions for fixed assets. In 2022, the company realized 6.6GW sales of photovoltaic modules, an increase of 190.8% over the same period last year, providing a strong support for the company's bottoming out and rebound.

TOPCon+ big components have outstanding advantages of backwardness.

The company's component production capacity is in a period of continuous expansion, which provides support for the revenue growth of the component business. Hefei, Funing, Wuhu three major production bases, planning and layout of N-type large-size battery chips, module capacity, including 1) components: Hefei planning 60GW capacity, the first phase of 15GW has reached full production in 2022, the second phase of 7.5GW and Funing 12GW are under construction, is expected to start production by the end of 2023, it is expected that the company's effective capacity by the end of the year will exceed 30GW. 2) Battery Link: the company plans TOPCon production capacity 20GW in Wuhu, of which the first phase of 10GW is under construction and is expected to be offline in July 2023.

After completion, it will be used to meet the matching needs of the upstream battery capacity of Hefei and Funing assembly base.

Attach importance to the development opportunity of the integration of optical storage and positive layout

The company plans to raise no more than 5.799 billion yuan for Wuhu Phase II 10GW high efficiency battery project, Xuzhou 10GWh energy storage system project construction, as well as supplementary liquidity. The company plans the total production capacity of Xuzhou energy storage system 30GWh, of which the first phase of 10GWh fixed increase project is expected to take the lead in construction and production, which is expected to form a coordinated development pattern of optical storage plate.

Earnings forecast, valuation and rating

The company's battery, components, energy storage system capacity rapid expansion, in the context of strong demand is expected to achieve rapid growth in shipments, forming a strong support for high performance growth. We expect the company to achieve operating income of 18.92 billion yuan / 37.43 billion yuan / 57.15 billion yuan from 2023 to 2025, an increase of 126.5%, 97.8%, 52.7%, 310 million yuan / 650 million yuan / 1 billion yuan, and 425.2%, 109.4%, 53.8%, respectively, corresponding to an EPS of 0.05, 0.11, 0.17 yuan per share. The three-year CAGR is 156.7%, and the corresponding PE is 57.1, 27.3, and 17.7 times. The value per share measured by the absolute valuation method is 3.58 yuan. By combining the absolute valuation method and the relative valuation method, we give the company the target price of 3.62 yuan per share, and give the "overweight" rating for the first time.

Risk tips: photovoltaic installation is not as expected, raw material price fluctuations, TOPCon new technology efficiency improvement is not as expected, the company's capacity construction is not as expected.