Core views

2023H1 achieved net profit of 244 million yuan, a year-on-year increase of 65.16%, and is at the center of previous forecasts. By the end of 2023Q2, the company's PV sector had orders of 9.202 billion yuan (tax included), a sharp increase of 121.41% over the previous year, exceeding our expectations, reflecting that under the continuous increase in installed demand for photovoltaic terminals and an accelerated downstream integration layout, demand for component equipment was strong. The company's photovoltaic module assembly lines and laminators maintained a leading market position, and achieved rapid growth in orders. The company is a leading component assembly line, and is actively expanding into the field of process equipment and battery equipment. In particular, it has a first-mover advantage in the field of perovskite equipment. The company is an enterprise in the industry that completed perovskite equipment development and actual product sales. It has clarified the development ideas of perovskite complete line equipment, and is expected to form a differentiated competitive advantage and achieve rapid development in line with the development trend of the industry.

occurrences

The company released its semi-annual report for 2023. In the first half of the year, it achieved operating income of 3.407 billion yuan, up 48.70% year on year; net profit of 244 million yuan, up 65.16% year on year; Q2 achieved revenue of 2,080 million yuan, up 65.79% year on year; and net profit of 91 million yuan, up 66.21% year on year.

Brief review

Interim results are in line with expectations, and profitability is steadily improving

The photovoltaic industry maintained a high level of prosperity. With the high quality of products and services, the company achieved a significant increase in product sales in the first half of the year. In the first half of 2023, the company achieved revenue of 3.407 billion yuan, an increase of 48.70% over the previous year, and net profit of 244 million yuan, an increase of 65.16% over the previous year.

The company previously predicted net profit of 225 to 265 million yuan for the first half of the year. The actual performance was at the center of the forecast, and the performance was in line with expectations.

By product, in the first half of 2023, the company's automated photovoltaic production line achieved revenue of 2,686 billion yuan, up 75.51% year on year, gross profit margin 21.46%, up 0.40 pct year on year; packaging automation production line achieved revenue of 385 million yuan, down 2.20% year on year, gross profit margin 23.69%, up 3.45 pct year on year; other products achieved revenue of 336 million yuan, down 8.48% year on year, and gross profit margin of 13.56%, down 1.39 pct year on year.

Profitability is steadily increasing. 2023H1 achieved a gross profit margin of 20.94%, up 1.00 pct year on year; the total cost ratio for the company period in the first half of the year was 10.73%, down 0.89 pct from the previous year. Among them, sales, management, R&D, and financial expenses rates were 3.25%, 4.11%, 4.73%, and -1.37%, respectively. +0.08 pct, -0.80 pct, +0.16 pct, -0.33 pct, and -0.33 pct. Overall cost control was good; the consolidated net interest rate for the first half of the year was 7.17%, up 0.72 pct year on year.

The increase in orders for photovoltaic equipment has exceeded expectations, and the future layout of perovskite equipment can be expected. Judging from the performance of photovoltaic business subsidiaries, Suzhou Shengcheng achieved revenue of 2,690 million yuan in the first half of the year, a year-on-year increase of 75.40%, net profit of 291 million yuan, an increase of 74.08% over the previous year, and a net interest rate of 10.82%. By the end of 2023Q2, the company's PV sector had orders of 9.202 billion yuan (tax included), a sharp increase of 121.41% over the previous year, exceeding our expectations, reflecting that under the continuous increase in PV terminal installed demand and an accelerated downstream integration layout, demand for component equipment was strong, and the company's photovoltaic module assembly lines and laminators maintained a leading market position, achieving rapid growth in orders.

At the same time, the company is actively expanding production capacity. At the beginning of the year, the new Shengcheng PV Northern Production Base project was completed and the equipment was put into operation. In particular, the laminator production capacity was greatly increased. Currently, the Shengcheng PV Intelligent Equipment Manufacturing Center in Suzhou is about to be put into use, which helps increase the company's photovoltaic module equipment production capacity and lays a solid foundation for future growth.

The company is the first company in the industry to complete the development of perovskite equipment and actually sell products. Currently, the company provides MW grade perovskite and overall solutions, and provides GW grade perovskite mass production equipment output and technical support. At the same time, the company has rich technical reserves, and the product matrix is continuously being optimized and improved. The perovskite industry is at a critical point in the development of MW production lines to GW production lines. Equipment plays an important role as the foundation of industrialization. The company's forward-looking layout in this field has a first-mover advantage, and is expected to achieve rapid growth in line with the development trend of the industry in the future.

Investment suggestions: The company focuses on the “photovoltaic+packaging+lithium battery” equipment business. PV module equipment benefits from continuous rapid growth in downstream production expansion orders. Battery equipment is actively deployed in the fields of TopCon, HJT, and perovskite. In particular, the perovskite sector has firm overall equipment plans, and future growth can be expected. We expect the company's operating income for 2023-2025 to be 64.43, 7.763 billion yuan, and 8.971 billion yuan respectively; net profit for 2023-2025 will be 485, 6.25 million yuan, and 751 million yuan respectively, up 60.6%, 28.9%, and 20.1% year-on-year respectively. The corresponding PE will be 20.5, 15.9, and 13.3 times, respectively, maintaining the “buy” rating.

Risk Warning: ① Risk that production expansion in the downstream module industry falls short of expectations: Photovoltaic equipment is one of the company's core businesses. The company occupies a leading position in the module assembly line field. Product demand mainly comes from the expansion of production in the downstream module industry. If the downstream sentiment declines and the expansion of production in the module industry falls short of expectations, then there will be a certain adverse impact on the company's performance growth. ② There is a risk that the development progress of new businesses such as battery equipment is lower than expected: Photovoltaic cell equipment is the company's key business. The company has a layout in battery technology routes such as TopCon, HJT, and perovskite. New business development is not only limited by changes in external factors, but also places higher demands on internal R&D and management capabilities. If major changes in external factors occur or the company's technology development and comprehensive operation capabilities are insufficient, it will face the risk of falling short of expectations. ③ After the company included Shenzhen Huidacheng in the scope of the consolidated statement in 2018, due to its inflated revenue and profits, there was an accounting error in the company's 2018-2020 annual report, which violated the provisions of the “Information Disclosure Management Measures”. On May 30, 2023, the Hubei Securities Regulatory Bureau issued a warning letter and took administrative supervision measures against the company and recorded the above violations in the integrity file.