Main points of investment:
Event: the company released the 2023 semi-annual report, the performance growth exceeded expectations. According to the company's announcement, 2023H1's revenue rose 9.4% year-on-year to 10.25 billion yuan, net profit increased 52% to 1.21 billion yuan, and non-home net profit rose 88.4% to 1.25 billion yuan compared with the same period last year. In the first half of 2023, revenue from photovoltaic products increased by 16% to 6.8 billion yuan compared with the same period last year, benefiting from a rapid decline in cost and the advantage of differentiated products. The gross profit margin of photovoltaic products increased to 24.3% year-on-year, while revenue from magnetic materials decreased by 15% to 1.82 billion yuan over the same period last year. The market game trend of permanent magnet ferrite stock is becoming more and more obvious, and the demand for soft magnetic materials benefiting new energy vehicles and photovoltaic inverters is increasing. The lithium battery business focused on the small power market, with revenue up 15.5% year-on-year to 940 million yuan.
The company continues to verify the advantages of photovoltaic products in the European market, fully benefiting from the downward cycle of silicon prices. According to Baichuan Yingfu data, the price of polysilicon in 2023 continued to decline from 235,000 yuan / ton in mid-February to 66,000 yuan / ton at the end of June, while the average price of 2023Q2 polysilicon fell 27.9% to 146,000 yuan / ton compared with the previous month. On the other hand, the company has significant advantages in differentiated products and channels in Europe, and the higher-than-expected performance in this round of rapid decline in cost further confirms the premium and bargaining power of the company's photovoltaic products in the European market.
Capacity expansion continues to advance, diversified product layout platform is beginning to show. Existing production capacity: according to the company announcement, as of June 30, 2023, the company has an annual production capacity of 220000 tons of ferrite pre-fired materials, 162000 tons of permanent magnet ferrites, 50,000 tons of soft magnetic and 25000 tons of plastic magnetic capacity, as well as 8GW photovoltaic cells, 7GW photovoltaic modules and 7GWh lithium batteries. Production expansion project: during the reporting period, the company realized the 6GWh high-performance lithium battery project, with an annual output of 22000 tons of permanent magnet ferrite and 15000 tons of soft magnetic has been partially put into production, while the existing projects under construction include Sichuan East Magnetic 12GW new high efficiency battery project and Lianyungang East Magnetic 5GW new high efficiency module project.
The earnings forecast was raised and the company's rating was upgraded from overweight to buy. The company firmly revolves around the "strategy of strengthening magnetism and developing new energy", extending the business of inductors and vibration devices longitudinally; putting 6GWh into production of lithium battery; and continuing to promote the capacity project of 12GW photovoltaic battery and 5GW photovoltaic module. Considering the rapid decline in the cost end of photovoltaic products in 2023, the company is expected to fully enjoy the product profit scissors difference by virtue of the differentiated market, and raise its profit forecast for 2023. It is estimated that the net profit of 225x26lash in 2023-2025 will be 2.25x342 billion yuan, respectively (the original profit forecast for 2023-2025 is 2122x34.2 billion yuan), and the corresponding PE in 2023-2025 will be twice as much as that in 12-11-8. With reference to the average valuations of comparable companies JinkoSolar Holding Co Ltd, Jing O Technology, Trina Solar, Oriental Sunrise, Dragon Magnetic Technology, Tiantong shares, Platinum New Materials, Azure Lithium Core and Yiwei Lithium Energy, the average valuation of comparable companies in 2023-2025 is respectively times that of 18-13-10 (among which Platinum New Materials selected Shen Wanhong profit forecast, other companies selected iFind industry consensus expectations), give the company an average valuation of comparable companies in 2023. Corresponding to 47.6% of the market space, the company's rating will be upgraded from overweight to buy.
Risk hint: European international trade policy risk, photovoltaic and ferrite magnetic industry competition aggravating risk