Events:

On October 27, 2023, the company released the third quarter report of 2023. During the Q3 reporting period, the company realized total operating income of 3.806 billion yuan, an increase of 93.40% over the same period last year, a decrease of 6.11% from the previous month, and a net profit of 31 million yuan, an increase of 122.30% over the same period last year. Down 63.35% From the beginning of the year to the end of the reporting period, the company achieved a total operating income of 9.412 billion yuan, an increase of 97.43% over the same period last year, and a net profit of 143 million yuan, an increase of 240.78% over the same period last year. The company's performance increased significantly compared with the same period last year, and revenue and profits declined month-on-month due to the downward price of the industry and the initial climbing of production capacity.

The production capacity of battery modules advanced smoothly, and profitability significantly improved 2023Q1-3's sales gross profit margin of 8.68%, year-on-year increase of 2.36pct, net sales profit rate of 1.51%, and year-on-year increase of 3.53pct. With the expansion of photovoltaic cell and module production capacity, profitability was significantly improved. The company's strategic planning focuses on the field of optical storage, rearranges the integrated business of battery chips, components and optical storage systems, and plans four major production bases of Hefei 60GW components, Funing 12GW components, Wuhu 20GW battery chips and Xuzhou 30GWh energy storage system. In terms of capacity construction progress, the first phase of Hefei 15GW large-size assembly project was put into production in 2022Q4 and has reached full production at present. Hefei Phase II (Phase I) 7.5GW and Funing 12GW are currently under construction and are expected to be put into production by the end of 2023. considering the capacity climbing time, the company's effective capacity by the end of the year is expected to exceed 30GW. The first phase of the TOPCon battery chip project of Wuhu 10GW was launched on July 28, 2023, and has reached full production, with a battery production efficiency of 25.6%, ranking among the forefront of the industry.

Storage and delivery of goods is growing rapidly, which is expected to provide new growth points of performance.

The company's energy storage business is still in its infancy, and the company has entered the field of energy storage for technology development and layout since 2015, and the progress of coordination with photovoltaic business has accelerated since 2022. In recent years, the scale of energy storage business carried out by the company has exceeded 150MWhdler 2023H1 energy storage product delivery 64MWh, which has increased rapidly compared with 2022 18MWh shipments. With the increase of the installed proportion of new energy, the importance of configuring energy storage is becoming more and more prominent in order to smooth and stabilize the power system, and there is considerable potential for demand growth in the energy storage industry. we believe that the company is expected to rely on the accumulation of technology research and development, years of photovoltaic market sales experience and customer relations, continue to enhance the scale of energy storage business and create a second growth curve for the company.

Earnings forecast, valuation and rating

Due to the continuous decline in the price of photovoltaic modules, the quotations for some models have broken through historical lows, and we have lowered our company's performance forecasts. we estimate that the company's operating income for 2023-2025 will be 155.9x31.81 billion yuan (the original value is 189.2 pound 374.3 billion yuan), and the year-on-year growth rate is 86.6% 104.1% 53.6% respectively. The net return to the home is RMB 800 million (the original value is RMB 3.1), and the year-on-year growth rate is 309.8%, 105.1%, 61.0% and 0.14 yuan per share, respectively, and the 3-year CAGR is 138.30%. The company's capacity continues to expand at a high speed and has good growth. We give the company a 24-year PE of 39 times, corresponding to a target price of 3.32 yuan per share, maintaining a "overweight" rating.

Risk tips: photovoltaic installation is not as expected, raw material price fluctuations, TOPCon new technology efficiency improvement is not as expected, the company's capacity construction is not as expected.