The world's leading high-purity polysilicon companies have sufficient inventory and are expected to further increase their market share. As one of the earliest solar photovoltaic high-purity silicon manufacturers established in China, the company has focused on R&D, production and sales of high-purity polysilicon since its establishment, and is committed to promoting the development of the global clean energy industry. With high-quality products and services, the company has established long-term and stable cooperative relationships with many leading enterprises in the downstream photovoltaic industry. Currently, the company has sufficient orders on hand. Coupled with the bottom up in silicon prices since the second half of this year and the continued release of new high-quality production capacity, the company's performance will gradually recover and become more certain in the future.
The release of short-term high-quality production capacity fell short of expectations. The recovery trend of rising silicon prices in the second half of the year is expected to continue in the first half of 2023. Industry expectations for oversupply of silicon material production capacity continued to strengthen, leading to a rapid decline in silicon prices. However, we believe that since it is difficult for new entrants to the industry to meet downstream requirements in the short term, and the overall product quality stability is relatively low during the production capacity escalation stage, the actual release of new high-quality production capacity since this year has not met market expectations. At the same time, combined with the continued strengthening of downstream companies' willingness to expand production, the CPIA has raised its forecast for the scale of new PV installations in 2023, and the growth in silicon demand is expected to continue to exceed expectations. Since July 2023, silicon prices have begun to return to an upward channel, and we believe that their upward correction trend is expected to continue in the second half of this year.
Long-term advanced N-type production capacity may be structurally mismatched. Leading companies are expected to fully benefit from the rapid growth of global N-type cell production capacity from 2022 to 2026. CAGR is expected to exceed 60% during this period, which is expected to drive the rapid rise of the upstream N-type silicon market. However, the technical indicators of N-type polysilicon generally need to meet the national standard of electronic grade 3 or higher. Currently, only a few enterprises in China have large-scale N-type silicon production capacity. We believe that under the current Siemens technology improvement route, the technical process of using large-scale reduction furnaces to produce N-type dense materials is difficult, and the barriers to leading enterprises are high. The structural mismatch of the advanced production capacity of N-type silicon materials may continue for a long period of time, and leading enterprises with large-scale N-type production capacity are expected to fully benefit from this round of structural mismatch.
The company, which has few large-scale N-type production capacity in the industry, is optimistic that the company will smoothly cross the cycle and continue to develop high-quality development, began actively deploying advanced N-type silicon production capacity as early as 2020. Currently, the company's N-type silicon has achieved batch supply and has been verified by mainstream downstream customers, making it one of the few enterprises in the industry with large-scale N-type silicon production capacity. In the history of recovery, the company completely experienced the previous cycle of long-term downturn in silicon prices, but with the advantages of low cost and advanced production capacity and healthy balance and liability management, the company achieved a rapid increase in market share in the midst of a wave of inefficient and backward production capacity, and has fully enjoyed the dividends of the high-quality development of the industry since then. Looking forward to the future, under the favorable situation where the company continues to maintain industry-leading advantages in low cost, high quality and advanced production capacity, and sufficient cash reserves, we are optimistic that the company can respond well and flexibly to this silicon price adjustment, smoothly through this cycle, and achieve further improvement in the core competitiveness of the enterprise.
Company profit forecasting and valuation
The company's revenue for 2023-2025 is estimated to be 181.29, 199.51, and 25.409 billion yuan, respectively (YOY:
-41.41%, 10.05%, 27.36%), and EPS were 2.99, 1.87, and 2.81 yuan respectively (YOY: -66.50%, -37.38%, 50.50%). According to reasonable valuation estimates, taking into account factors such as stock price catalysts, etc., the company was given a P/E valuation of 17 times in 2023, corresponding to the target price of 50.77 yuan/share within the next six months, giving the company a “highly recommended (first)” investment rating.
Investment risk tips
Risk of falling silicon prices and rising raw material prices.