The first-mover advantage in the distributed photovoltaics sector is obvious. The company that maintained the “increase in holdings” rating issued 23 annual reports. In the first half of the year, it achieved revenue of 27.85 billion yuan, an increase of 17.91% over the previous year; it achieved net profit of 1,904 billion yuan, an increase of 13.70% over the previous year. In the context of the “whole county promotion” policy and stimulated by silicon price reductions, we believe that the company's distributed business is expected to usher in rapid growth. We expect the company's EPS to be 2.31/2.69/3.08 yuan respectively in 2023-2025. Based on the segmental valuation method, the average PE values of low-voltage electrical appliances and comparable photovoltaics companies in 23 years were 23.5 and 13.7, respectively. Considering that the company's expected growth rate in the low-voltage electrical and photovoltaic business was lower than that of the corresponding comparable company, the company's two businesses were given 23-year 15 and 9 times PE, respectively, corresponding target prices of 29 yuan/share, maintaining a “increase in maintenance” rating.
The price reduction of silicon materials stimulates demand, and the addition of new installed capacity for distributed photovoltaics is improving
Distributed photovoltaics have advantages such as high yield, many developable resources, and local consumption, and the “whole county promotion” policy further promotes their development. According to Wind statistics, in August 2023, the price of silicon materials fell from a high of 300 yuan/kg in 2022 to the 60-70 yuan/kg range. A sharp drop in silicon prices will drive module prices down, which in turn will reduce the initial installation cost of distributed photovoltaic project systems. According to data from the National Energy Administration, 2023H1 national distributed photovoltaics added 40.96 GW of installed capacity, an increase of 108% over the previous year; of these, household distributed photovoltaics added 21.52GW of installed capacity, an increase of 142% over the previous year. We believe that cost reduction is expected to stimulate an increase in the willingness of downstream owners to install distributed photovoltaics, the growth rate of distributed photovoltaic installations is expected to continue in the second half of the year, and the company's distributed photovoltaic business is expected to benefit from the high growth in the industry.
Operation, maintenance, and channel capabilities continue to improve, and the scale of the company's household photovoltaic business continues to expand. As one of the earliest domestic enterprises to engage in household photovoltaics, the company has already expanded its business scope to the core markets of household projects such as Zhejiang, Shandong, Jiangsu, and Hebei, and has accumulated a large amount of customer resources. According to the company's semi-annual report, by the end of 23H1, the company had served more than 1 million end users, and channel construction had sunk to districts, counties, and townships. Zhengtaian Energy, a subsidiary of the company, focuses on the household photovoltaic market. 2023H1 achieved revenue of 13.705 billion yuan and net profit of 1,202 billion yuan. In the first half of the year, it achieved a development capacity of more than 5.3 GW. Currently, it has more than 1 million end household users, and its market share has remained number one in the industry for many years.
The traditional low-voltage electrical appliance business is expected to slowly recover
The company achieved low-voltage electrical appliance business revenue of 11.053 billion yuan in the first half of the year, an increase of 7.08% over the previous year. According to data from the China Electric Power Enterprise Federation, the electricity consumption of the entire 2023H1 national society was 4307.6 billion kilowatt-hours, an increase of 5% over the previous year. The company's low-voltage appliances business revenue is mainly related to the macroeconomic situation and social electricity consumption. We believe that as the economy continues to recover in the second half of the year, demand in the fields of electricity, industry, infrastructure, etc. is expected to pick up, and the company's low-voltage appliances business revenue may return to a steady growth channel.
Risk warning: industry competition intensifies; raw material prices fluctuate.