Key points of investment:
Incident: The company announced its three-quarter report for 2023. In the first three quarters of 2023, the company achieved operating income of 28.017 billion yuan, an increase of 33.27% over the previous year, achieved net profit of 1,279 billion yuan, an increase of 71.18% over the previous year, net profit after deducting non-return net profit of 1,571 billion yuan, an increase of 104.1% over the previous year. The company achieved net profit of 418 million yuan in Q3 in a single quarter, an increase of 72.29% over the previous year, and net profit of 733 million yuan after deducting non-return net profit of 733 million yuan, an increase of 149.09% over the previous year. The performance was in line with expectations.
Component shipments have been growing steadily, and unit profit has continued to increase month-on-month. According to the company's third quarterly report, the company's Q3 component shipments in '23 are expected to be 6.5 to 7 GW, and confirmed revenue is about 5.5 GW. The Malaysian production site, which was put into operation in May 2022, is a strategic fulcrum for the company to actively explore overseas markets, and began shipping to the US in the first half of the year. Benefiting from the release of the company's component production capacity in Southeast Asia, the company's component shipments to the US will increase significantly, which is expected to drive the company's module profit per watt.
Q3 The performance of large reserves is under pressure. Q3 Due to the large fluctuation in the price of lithium carbonate, downstream customers are generally wait-and-see with regard to the large storage business, which has put pressure on the shipment volume and profitability of the company's large storage business.
HJT is progressing smoothly, and production capacity is gradually being released. The HJT project at the company's Nanbin and Jintan bases was successfully put into operation. On August 13, the first 15GW (Phase I) heterogeneous junction module of Dongfang Rishengning Nanbin Base was successfully launched. Following the launch of the first 4GW heterojunction battery production line in Jintan in April this year, Dongfang Risheng has made another major breakthrough in heterojunction industrialization. According to the company's production capacity plan, it is expected that HJT production capacity will reach 9 GW by the end of the year. In terms of efficiency, the company expects HJT's mass production efficiency to reach 26% next year. In terms of cost, it is expected that the full cost of HJT production will be on par with perc by the end of this year.
Q3 accrued losses of $72 million due to contract disputes. The company signed a component supply contract with customer FOCUS in '20. Later, due to a contract dispute, FOCUS initiated arbitration in '21. Recently, the arbitration results were received. The company accrued losses of $72 million in full based on the award amount. After receiving the results, the company made a disclosure and responded to the Shenzhen Stock Exchange's letter of concern. Since the company has fully calculated losses, the impact of this matter on financial statements has basically been fully responded to, reminding investors to pay attention to the progress of regulatory disclosure compliance, timeliness, etc. in handling the compliance and timeliness of the incident.
Lower the profit forecast and maintain the company's “buy” rating. The company is a leading heterogeneous component company, and large-scale heterojunction production is about to be put into operation; US shipments have increased, component profits have clearly recovered, and the company's core business has clearly benefited. In '23, due to a one-time loss accrued by an overseas contract dispute company and a sharp drop in component prices, we lowered the company's profit forecast for 23 to 25 years. We expected the company's net profit for 23 to 25 years to be 1,632/25.57/2,903 billion (previous forecast was 20.21/2,875 5/3.316 billion). The current stock price corresponds to PE 12/8/7 times, maintaining the company's “buy” rating.
Risk warning: The risk of increased competition in the photovoltaic industry, the risk that the installed capacity of photovoltaics falls short of expectations, the risk that mass production of heterogeneous junctions falls short of expectations, and the installed capacity of new energy storage falls short of expectations. The company received a letter of concern from the Shenzhen Stock Exchange on October 9, 23, and responded and announced on October 17, reminding investors to pay attention to the risk of compliance with the company's contract disputes and letter disclosure.