Recently, together with our customers, we organized an industrial tour and visited four companies covering four major industrial sub-industries. They are Zoomlion Heavy Industry Science and Technology (1157 HK/ unrated, construction machinery), Zhuzhou CRRC Times Electric (3898 HK/ unrated, rail transit equipment / IGBT), Dongfeng Motor (489 HK/ unrated, automobile) and Jingshan Light Machinery (000821 CH/ unrated, photovoltaic equipment). Through the on-the-spot investigation of the company, we have a more in-depth understanding of the industrial industry and various sub-sectors. Jingshan Light Machinery (000821 CH/ unrated) in the photovoltaic equipment industry is the terminus of our industrial research.

Jingshan Light Machinery: photovoltaic module equipment leading enterprises: the company's main photovoltaic equipment and packaging equipment, of which photovoltaic equipment is mainly module equipment. The component equipment includes series welding machine, laminating machine, assembly line, etc. The investment of assembly equipment per gigawatt of the new production line in 2022 is about 60 million yuan (RMB, the same below). In the whole line value, the series welding machine, assembly line, laminating machine and testing equipment account for 35%, 45%, 15% and 5% respectively. The company can produce the remaining 65% value equipment except the series welding machine, in which the laminating machine is the process equipment and the gross profit margin is high. The company is the leader of component equipment. At present, the global market share of the assembly line is more than 50%, and the laminating machine is also over 30%.

The replacement cycle of component equipment is only 2-3 years: the new technology route of battery chip leads to rapid replacement of battery chip equipment, but has little impact on component equipment, TOPCon component equipment and PERC can be universal, HJT component equipment has some differences, mainly in the previous welding. The reasons for the replacement of the component equipment are as follows: 1) the size of the silicon wafer has changed, which has increased from 166mm to 182/210mm in the past 2 years, resulting in the incompatibility of the component equipment; 2) the silicon wafer has become thinner, and the mainstream thickness of the N-type silicon wafer is 130 microns at present, which will be reduced to 110 microns or less in the future, which will lead to the incompatibility of the component devices. 3) the efficiency of component equipment is very fast. Three years ago, the single-line production capacity was only 0.3 gigawatts, but now it has reached 0.7-1 gigawatts. The cost of new equipment can be recovered in 1-2 years after the single-line employment has been halved from 40 to 20 minutes. Therefore, although the physical life of component equipment is 5-7 years, it is usually replaced in 2-3 years.

Under the tide of photovoltaic expansion, there are full orders for module equipment, and the company selectively accepts orders with high gross profit margin: driven by the rapid growth of new photovoltaic installations and overseas manufacturing requirements, there are huge production expansion plans for mainland and overseas components. as a result, the company has full orders on hand. Due to the capacity bottleneck, the company selects the head customers with better payment terms and chooses to take orders. The gross profit margin of overseas customers is 10 percentage points higher than that of the mainland. At the end of 2022, the company ordered 5.4 billion yuan for photovoltaic equipment, which increased significantly in the first half of this year. The revenue of the company's photovoltaic equipment is generally recognized after 6-12 months of hand orders.

Battery pads and perovskite equipment are expected to create a second growth curve: by recruiting teams from outside and partnering with battery chip equipment companies such as Goldstone, the company has expanded its business to battery wafer wet and coating equipment, winning orders for Goldstone 4 GW HJT battery chip equipment at the end of 2022, while progress in TOPCon has been relatively slow. The company has completed the development of perovskite equipment earlier in the industry and has actual product sales, and has accumulated in both single junction and laminated battery technology routes. it is a rare perovskite equipment enterprise in the industry that can provide overall solutions. There are some differences between the packaging equipment of perovskite components and crystalline silicon components, but they are not fundamentally different, and series welders are no longer used, and all equipment can be provided by the company. the company's advantage in crystal silicon component equipment is expected to be maintained in perovskite. The company said that the current investment of perovskite equipment per gigawatt is less than 1 billion yuan. The company believes that perovskite is still in the early stage of development, and it is difficult to have large-scale orders in the short term.

Industry revelation: the sharp increase in leading orders for component equipment reflects that the current trend of production expansion in the photovoltaic manufacturing industry has not slowed down, overcapacity and fierce competition in most links will continue, while equipment companies will benefit most, and we expect significant growth in performance this year. However, the demand for photovoltaic equipment mainly comes from the new capacity, which roughly corresponds to the increase in the global installed capacity, and after two consecutive years of rapid growth of more than 40%, the growth of new installed capacity will probably slow down next year. At the same time, after intensified competition leads to a decline in the profit margin of the photovoltaic manufacturing industry, its willingness to expand production will also weaken, so it may become the short-term peak of equipment demand this year, and equipment enterprises will face certain performance pressure next year. The expansion of product categories will be an important means for equipment enterprises to span the cycle.