Events:

The company released its semi-annual report for 2023. 2023H1, the company achieved operating income of 649 million yuan, an increase of 20.02% over the same period last year, a net profit of 88 million yuan, an increase of 86.16% over the same period last year, and a net profit of 82 million yuan, an increase of 81.32% over the same period last year, a year-on-year increase of 21.19%, an increase of 5.55pct, a net profit rate of 13.49% and an increase of 4.79pct. 2023Q2, the company achieved operating income of 345 million yuan, an increase of 17.93% over the same period last year, and a net profit of 49 million yuan, an increase of 87.41% over the same period last year, deducting 46 million yuan of non-return net profit, an increase of 89.08% over the same period last year.

Comment

The downstream demand is strong, and the junction box is growing rapidly. At the revenue end, 2023H1, the company's revenue grew rapidly, of which the photovoltaic junction box business achieved revenue of 544 million yuan, an increase of 26.57% over the same period last year, accounting for 83.82%, mainly due to the strong demand downstream of photovoltaic in the first half of the year. From January to June 2023, the newly installed scale of photovoltaic reached 78.42GW, an increase of 154% over the same period last year. The output of polysilicon, silicon wafers, battery wafers and modules all increased by more than 60% over the same period last year. Lead to a great increase in the demand for junction boxes. At the profit end, the company's profitability grew strongly, with the gross profit margin of the junction box business rising to 20.07% year-on-year, and the connector business increasing 10.40pct to 24.81% year on year. The sharp increase in gross profit margin is mainly due to the rapid downward trend in the prices of copper, plastic particles and diodes, the company's main raw materials, since 2023Q1. The increase in the net profit margin slightly lower than the gross margin is mainly due to the substantial increase in the sales expense rate, and the number of sales staff increased with the expansion of the scale during the reporting period, resulting in a 194.78% increase in the sales expense rate compared with the same period last year. Looking forward to the follow-up, closely around the development route of the module factory, the company continues to develop new photovoltaic junction boxes and connector products and improve the performance of photovoltaic junction boxes and connectors. Downstream customers have covered mainstream photovoltaic module factories at home and abroad, such as Trina. In the future, as the downstream demand for photovoltaic maintains a strong growth momentum, it is expected to further improve its market position.

Actively layout intelligent junction box technology. Through continuous R & D and innovation, optimizing circuits and upgrading control modules, the performance of the company's intelligent junction box products has been gradually improved, and a new generation of intelligent junction box products with efficiency optimization function has been launched. With the expansion of the household roof photovoltaic market, the intelligent development of photovoltaic systems and the reduction of production costs, the company's intelligent junction box is expected to be further promoted and applied.

Profit forecast: as the head enterprise of photovoltaic junction box, the company actively arranges new technologies such as intelligent junction box, which is expected to fully benefit from downstream demand and further improve its market position in the future. We expect the company to achieve a net profit of 1.99 / 2.87 / 3.69 yuan from 2023 to 2025, corresponding to 14 / 11 times of the PE. Give 2024 earnings 15 times PE valuation, the target price is 51.70 yuan, cover for the first time, give "overweight" rating.

Risk hint: downstream demand is lower than expected, profit forecast and valuation judgment are not as expected.