Key points of investment

The company's performance grew steadily, and profitability improved markedly

In 2023Q1-Q3, the company achieved operating income of 28.017 billion yuan, an increase of 33.27% over the previous year; net profit of 1,279 billion yuan, an increase of 71.18% over the previous year; and a gross profit margin of 14.93% and a net profit ratio of 4.64%. In 2023Q3, the company achieved operating income of 10.410 billion yuan, a year-on-year increase of 23.84%, a year-on-month decrease of 3.87%; net profit of 418 million yuan, a year-on-year increase of 72.29%, a year-on-month decrease of 23.99%, a net profit of 733 million yuan, a year-on-year increase of 149.09%, a year-on-month increase of 29.04%, and a net profit margin of 17.43%, a month-on-month decrease of 1.15pct. 2023Q1-Q3, the sales volume of the company's component products increased, while the self-supply ratio of batteries increased to optimize the company's profitability, and performance achieved rapid growth. In 2023Q3, there is a big difference between the company's net profit that is not attributable to the parent's net profit and the net profit of the company. The main reason is that the contract arbitration resolution between the company and FOCUS had an impact on the company's non-operating expenses, and the company charges non-operating expenses due to the principle of accounting prudence.

New production capacity is being implemented in an orderly manner, and the scale of component sales continues to expand

2023Q1-Q3, the sales volume of the company's photovoltaic module products increased, and profitability improved significantly. It mainly benefited from factors such as the company's expanded production and implementation, the continued expansion of module sales scale, and the beginning of stable shipments at overseas battery module production bases. By the end of the second quarter of 2023, the company had formed an effective production capacity including 15 GW batteries and 25 GW modules, mainly distributed in Chuzhou, Anhui, Jintan, Jiangsu, Yiwu, Zhejiang, Ningbo, Zhejiang, Malaysia, and Baotou, Inner Mongolia. In terms of N-type expansion, the company's 4GW heterojunction battery+6GW module project and the second production line in Jintan have all been decommissioned and are close to full production. Other production lines are also being commissioned and put into production one after another. Furthermore, Ninghai's 5GW heterojunction battery+10GW module is progressing smoothly. The first module went offline on August 13. The production capacity of heterojunction batteries is estimated to be close to 3 GW in 2023, based on the new production capacity being put into production and the subsequent increase in production capacity.

Heterojunction technology continues to break through, and cost reduction and efficiency continue to advance

The company is leading the progress of heterojunction technology. Through its own patented 0BB battery technology, 210 ultra-thin silicon wafer technology, pure silver dosage less than 10 mg/W, and stress-free continuous connection technology, the first mass production of this series of heterojunction batteries and components, the company has promoted large-scale mass production of this series of heterojunction batteries and modules. By the end of July, the single-watt consumption of pure silver mass-produced heterojunction products by the company had dropped to less than 10mg; at the same time, related heterojunction component products had passed through a third party agency T? V South Germany tested that the maximum power exceeded 740W (132 half-chip components), and the high power advantage was obvious; the first-mover technology advantage enabled the relevant components to maintain a high power level while reducing overall costs, achieving cost reduction and efficiency.

Profit forecasting and valuation

Lower the profit forecast and maintain the “buy” rating. The company is a leading photovoltaic module company, and HJT technology leads the industry. Considering the recent pressure on PV module prices and the downward trend in the industrial chain price center, we lowered the company's profit forecast. The company's net profit forecast for 2023-2025 is estimated to be 17.04, 22.08, and 28.12 billion yuan (18.94, 25.09, and 3.269 billion yuan respectively before the downgrade), corresponding to EPS of 1.49, 1.94, and 2.47 yuan respectively. PE is 13, 10, and 8 times, maintaining the “buy” rating.

Risk warning: Heterojunction mass production progress falls short of expectations, PV installation demand falls short of expectations, competition in the energy storage industry has intensified, and international trade policy has fluctuated.