Incidents:

The company released its 2023 semi-annual report. During the reporting period, the company achieved total operating revenue of 3,715 million yuan, a year-on-year decrease of 0.29%, and achieved net profit of 261 million yuan, a year-on-year decrease of 28.52%. Among them, Q2 achieved total operating income of 1,810 million yuan, a year-on-year decrease of 4.93%, a year-on-year decrease of 173 million yuan, a year-on-year decrease of 21.30%, a year-on-year increase of 97.16%, and a year-on-year increase of 7.15 pct.

PV glass production capacity is steadily being invested, and performance is expected to continue to grow

2023H1's glass-related business achieved revenue of 2,356 million yuan, an increase of 11.80% over the previous year. In particular, photovoltaic glass products achieved a significant year-on-year increase in revenue. The overall gross profit margin of the glass sector was 8.3%, down 5.4 pct from the previous year. It was mainly affected by the increase in raw material prices, and profit margins were compressed. In 2021, Jinjing Technology completed research and development of ultra-white TCO coated glass substrates, and successfully developed 3.2mm and 2.65mm ultra-white TCO conductive glass on the basis of high transmittance substrates. The company has established supply relationships with some cadmium telluride and perovskite battery companies at home and abroad, and has been recognized by downstream customers. The company's Ningxia 600t/d photovoltaic rolled glass production line continues to improve product quality indicators and provides support to leading domestic photovoltaic module companies. The next 2 1200t/d production lines have passed the hearing. The first phase of Jinjing Malaysia is in steady production. The second phase of the 600t/d production line was launched in May 2023, and the product was successfully launched at the end of the reporting period.

Soda ash profit improved, business operation stability improved

The chemical sector of 2023H1 Company achieved operating income of 1,993 billion yuan, down 11.62% year on year, achieved a gross sales margin of 22.3%, and a year-on-year increase of 2.9 pct. The main reason for the profit increase was that raw material prices continued to drop in the first half of the year and production consumption fell, so the pressure on the cost side was partially relieved. However, the price of soda ash fell sharply in the second quarter from a February high, with a drop of about 29%, so performance was partially affected. As the price of soda ash rebounded in August, profits are expected to improve. The company's soda ash business is operated by Haitian Company, a wholly-owned subsidiary, with an annual production capacity of 1.5 million tons. In addition to meeting the needs of the company's glass sector, all of the remaining production capacity is exported.

Profit Forecasts, Valuations, and Ratings

We expect the company's operating income in 2023-2025 to be 82.5/93.8/10.79 billion yuan (original value was 77.0/82.5/95.1 billion yuan), with a year-on-year growth rate of 10.6%/13.7%/15.1%, net profit of 6.2/9.1/1.06 billion yuan (original value of 61/7.9/990 million yuan), and a year-on-year growth rate of 75.0%/45.8%/16.5%, and EPS of 0.44/0.64/0.74 yuan/share, 3 years The CAGR is 43.8%, and the corresponding PE is 17/12/10 times. The main reason for the increase in performance is that downstream perovskite mill business is rapidly developing, demand is expected to grow, and profits are increasing due to the rebound in soda ash prices. Referring to comparable company valuations, we gave the company 18 times PE in 2024, with a target price of 11.44 yuan, and maintained a “buy” rating.

Risk warning: There is a risk that the company's market share will be squeezed due to large-scale investment in photovoltaic glass production capacity, the company's photovoltaic glass production expansion project will not progress below expectations, and policy supervision risks.