The company's 2023Q3 performance is in line with expectations, benefiting from an increase in the share of N-type products and silicon wafers. Profitability remains steady, and production capacity and product structure are expected to accelerate improvements. At the same time, the company is actively expanding fields such as photovoltaic systems and smart energy storage, strengthening diversified and collaborative business development, and opening up new long-term growth space. Considering the continued pressure on prices due to increased competition in the industry, we lowered the company's 2023-25 EPS forecast to 3.11/3.79/4.55 yuan, gave the company a target price of 38 yuan (based on 10 times PE in 2024), and maintained the “buy” rating.
Performance was in line with expectations, and gross margin increased steadily. In 2023Q1-3, the company achieved operating income of 81,119 billion yuan (+39.4% YoY), net profit of 5.077 billion yuan (+113.3% YoY), and gross margin of 16.8% (+3.4pcts YoY); of these, 23Q3 achieved operating income of 31,736 billion yuan (+41.3% YoY, +13.1% QoQ), net profit of 1,537 billion yuan (+35.7% YoY, -13.3% QoQ), gross margin of 16.7% (+ 3.4pcts YoY, +0.6pct QoQ).
Increasing the share of N-type and silicon wafers is expected to help maintain stable profitability. According to information from the company's performance exchange meeting, the 2023Q1-3 PV module shipment volume is about 45-46GW, of which the Q3 shipment volume is about 18.5GW, and the confirmed sales volume exceeds 16GW; we expect its annual sales volume to reach 65-70GW, and the shipment scale in the high price market in North America is expected to reach 4-5 GW. The company's Q3 module's single-watt profit was about 1.1 gross/W, which was basically the same over the previous month. The company plans to reach 50/75/95GW of silicon wafer/battery/module production capacity by the end of 2023 and accelerate the decline in TopCon production capacity. We expect that its 2023/24 TopCon shipment ratio may reach 15%/60%, respectively; at the same time, the company's silicon wafer self-supply ratio in 2024 is also expected to increase to more than 50%. By upgrading the N-type product structure and increasing the silicon wafer self-sufficiency rate, it is expected to help stabilize profitability.
Distributed systems, scaffolds, energy storage and other businesses have maintained high growth, and the diversified development layout continues to improve. Distributed system: The company shipped about 6.7 GW of distributed systems in 2023Q1-3, of which Q3 shipped nearly 2.5 GW, confirmed revenue of about 2.5 GW (corresponding equity size about 1.8 GW), and corresponding profit per watt exceeded 0.18 yuan. We expect that the company's distributed system shipments will reach about 9GW in 2023 (corresponding equity size is about 6.5 GW), and it is expected to maintain an increase of more than 40% in 2024. Photovoltaic stents: The company shipped about 5.6GW of photovoltaic stents in 2023Q1-3, of which about 2.3GW was shipped in Q3, and tracking brackets accounted for 50%-60% of shipments. We expect the company to ship about 8GW of photovoltaic stents in 2023. Benefiting from structural optimization and cost reduction, profitability is expected to improve steadily. Energy storage system: The company's 2023Q1-3 energy storage shipments are close to 1 GWh, and we expect it to ship around 2 GWh throughout the year. The company has accelerated the investment and construction of energy storage battery production capacity. It has formed a combined production capacity of 12GWh energy storage batteries, DC battery cells, and AC/DC products. Moreover, 2024H1 battery system production capacity is expected to further expand to around 26GWh, and shipments are expected to accelerate growth.
Risk factors: the price of photovoltaic products continues to decline; the risk of overseas trade policy; the risk of technology route switching; the company's production capacity release falls short of expectations; the risk that the price of photovoltaic storage products will continue to decline.
Profit forecast, valuation and rating: Considering the increased competition in the photovoltaic industry chain and continued pressure on product prices, we lowered the company's 2023-25 net profit forecast to 67.7/82.3/9.89 billion yuan (original forecast value was 78.0/93.5/11.18 billion yuan). The corresponding EPS forecast was 3.11/3.79/4.55 yuan, respectively, and the current price corresponding to PE was 10/8/7 times, respectively. Referring to the current average PE of comparable companies in the photovoltaic module industry (Longji Green Energy, Jingke Energy, Jingao Technology, and Artes) in 2024 based on Wind's unanimous profit expectations, the company was given 10 times PE in 2024, corresponding to the target price of 38 yuan, maintaining a “buy” rating, considering that the company is a leader in integrated photovoltaic modules and continues to improve the capacity structure upgrade and downstream sector expansion.