Main points of investment
Photovoltaic junction box leading enterprises, profits hit bottom and rebounded. The company ploughs photovoltaic junction boxes and connectors and is an industry leader. With the strong demand in the downstream photovoltaic industry, the company's revenue / return net profit has increased from 295,000,000 yuan in 2017 to 118,000,000 yuan in 2022, with CAGR reaching 30% and 29%. 2023H1's revenue and return net profit are RMB 649 million and 86% respectively, with an increase of 22%. We expect that the company's profitability will further improve with the increase in the proportion of highly profitable new products and the gradual decline in the expense rate under scale effect.
Benefiting from the strong photovoltaic demand for junction boxes, the share of Longtou City is expected to increase. The continued strong demand in the global photovoltaic industry has led to a high demand for junction boxes. We estimate that the global photovoltaic installed capacity will reach 370/572GW in 2023 and 2025, with a corresponding demand of 1.110 billion photovoltaic junction boxes and 29.5% CAGR from 2022 to 2025. The competition pattern of the photovoltaic junction box industry is relatively scattered, with a combined market share of only 20% of psychic shares and fast electronics in 2022. CR2's market share is relatively low. With the addition of listed funds, capacity expansion and overseas plant construction, we predict that Longtou's market share is expected to further increase in 2023.
Binding components leading shipments continued to increase, cost downside + high gross margin of new products increased to boost profitability improvement. 1) quantity: the company works closely with the component leader. The top five customers are all well-known component enterprises. The top two customers, Tianhe and Jing'ao, are both top four in the industry, accounting for more than 40% of sales, and the company benefits from a high increase in shipments. at the same time, in response to the high demand of the market, the company is expected to increase its production capacity. The production capacity of the company is expected to reach 100 million sets by the end of 2023, and we expect to ship 70 million sets + for the whole year. 2) benefit: the decline in the price of copper and other raw materials drives down costs, and the company looks forward to the layout of intelligent junction boxes with turn-off and optimization functions. The gross profit margin of intelligent junction boxes is far higher than that of general junction boxes. With the increase in the proportion of new products, the company's profits are expected to improve structurally.
Profit forecast and investment rating: we expect the company's return net profit from 2023 to 2025 to be RMB 2.05 million, an increase of 73%, 44% and 33% over the same period last year, corresponding to the PE of 21-14-11. Considering that the company is the leader in the junction box field, the company is given a "buy" rating for the first time.
Risk tips: the growth of industry demand is less than expected, industry competition intensifies, and raw material prices fluctuate sharply.