Core viewpoints

The company released its third quarter report. In the first three quarters of 2023, the company achieved an operating income of 15.757 billion yuan, an increase of 11.56% over the same period last year, and a net profit of 1.65 billion yuan, an increase of 36.6% over the same period last year. 2023Q3 achieved a net profit of 438 million yuan, an increase of 6.6% over the same period last year and a decrease of 30.4% from the previous month. In terms of business, the company's magnetic materials and equipment business shipments grew steadily in the first three quarters of 2023, with a year-on-year improvement in gross profit margin; Q3 shipments of photovoltaic products increased month-on-month and capacity construction accelerated; lithium power business led the industry and shipments increased significantly.

Q4 gross profit margin is expected to improve after the completion of the company's TOPCon climbing.

Event

The company released its third quarter report.

In the first three quarters of 2023, the company realized operating income of 15.757 billion yuan, an increase of 11.56 percent over the same period last year, realized net profit of 1.65 billion yuan, up 36.6 percent over the same period last year, and deducted 1.63 billion yuan of non-return net profit, an increase of 53.7 percent over the same period last year. From a quarterly point of view, 2023Q3 achieved revenue of 5.512 billion yuan, an increase of 15.9% over the same period last year, down 1.8% from a month earlier, and a net profit of 438 million yuan, an increase of 6.6% over the same period last year, down 30.4% from a month earlier.

Brief comment

Photovoltaic products: Q3 shipments increased month-on-month, capacity construction accelerated.

In terms of shipments, the company shipped 6.87GW photovoltaic products in the first three quarters of 2023, including battery export 1.8GW and module shipment 5.07GW, an increase of 50% over the same period last year. At the same time, the company's capacity construction accelerated during the reporting period, and on October 11, the company announced that the first phase of Yibin 12GW high-efficiency battery project 6GW new high-efficiency battery production line has been completed and gradually put into production.

In terms of gross profit margin, the gross profit margin of the company's photovoltaic products was 22.25% in the first three quarters of 2023, an increase of 8.34pct over the same period last year.

Magnetic materials and equipment: shipments grew steadily and gross profit margin improved compared with the same period last year.

In terms of shipments, the company shipped 142600 tons of magnetic materials in the first three quarters of 2023, an increase of 2.8% over the same period last year, of which the company's products such as trumpet magnets and magnetic tiles grew against the market, while soft magnetic shipments increased rapidly in the field of new energy. In terms of gross profit margin, the gross profit margin of the magnetic materials business in the first three quarters of 2023 was 26.9%, an increase of 3.27pct over the same period last year.

Lithium business: the driving force rate is leading in the industry, with a substantial increase in shipments.

In terms of shipments, the company shipped 242 million lithium products in the first three quarters of 2023, an increase of 73.2% over the same period last year. In terms of production capacity, the company's third phase of lithium power production capacity climbed smoothly. In terms of gross profit margin, the gross profit margin of the company's lithium battery business was 15.68% in the first three quarters of 2023, an increase of 4.43pct over the same period last year.

Q3 gross profit margin decreased slightly compared with the previous month, and Q4 gross profit margin is expected to improve after the completion of TOPCon climbing.

In 2023, the gross profit margin of Q3 company was 17.24%, which was lower than that of Q2 year by 4.4pct. This is mainly due to the high cost caused by the slope climbing of the company's TOPCon production capacity, which is a drag on Q3 gross profit margin. We expect gross profit margin to improve after Q4 TOPCon capacity climbing is completed. The expense rate during the company is relatively stable, with an expense rate of 8.14% in the first three quarters of 2023, an increase in 0.3pct compared with 2022, mainly due to the expansion of business scale and the increase in various management expenses to varying degrees.

The business situation is sound, and the company's cash flow is good.

Thanks to business growth and liquidity management, the company's operating cash flow and cash on hand are in good condition. The net operating cash flow of the company in the first three quarters of 2023 was 2.959 billion yuan, an increase of 95.67% over the same period last year. By the end of the third quarter, the company's monetary capital reached 9.546 billion yuan, an increase of 68.83% over the end of 2022.

Profit forecast: the company has the advantages of channel and product differentiation, and leads the profitability industry. We expect the company's 2023-2025 net profit to be 20.75,24.00 and 2.797 billion yuan, corresponding to a PE valuation of 11.65,10.07,8.64 times on October 20, 2023, maintaining a "buy" rating.

Risk tips: 1. The risk that the demand of the industry is lower than expected. 2. The risk that the component business share is occupied by the head enterprise. 3. The risk that the progress of photovoltaic cell technology is not as good as expected.