The world's leading photovoltaic junction box company, covering mainstream module manufacturers, has been deeply involved in the junction box industry for 18 years. It is the world's leading manufacturer of photovoltaic junction boxes. Its main products include PV module junction boxes, connectors, wiring harnesses, etc. In 2020-2022, the company achieved operating income of 843, 11.32, and 1,249 billion yuan, respectively, with year-on-year increases of 2.11%, 34.27%, and 10.28%, respectively; net profit of 0.96, 0.80 and 116 million yuan respectively, with year-on-year increases of -10.80%, -17.25%, and +45.08% respectively. Affected by multiple factors such as high commodity operation and relatively tight chip and diode supply, the company declined in 2020-2021. Later, the company adjusted the price mechanism, etc. Respond positively to measures to achieve rapid performance growth in 2022. In 2023Q1-Q3, the company achieved operating income of 1,152 billion yuan, an increase of 17.11% over the previous year, and realized net profit of 145 million yuan, an increase of 53.91% over the previous year.
Junction boxes are an important auxiliary material for photovoltaic modules. The company invests and expands production and actively grasps the industrial window. The PV module junction box is an important part of solar photovoltaic modules, accounting for about 2% of the module cost, and plays two important functions of connection (module connection, output current) and protection. The market space is growing rapidly, driven by a boom in photovoltaic demand. The 2023-2025 PV junction box market space is estimated to be 181.44, 232.43, and 26.763 billion yuan respectively. Currently, the competition pattern in the junction box industry is scattered. As an industry leader deeply involved in the junction box field, the company actively grasps the downstream boom window period to increase market share. According to the company's production capacity plan, as the construction of the company's fund-raising projects begins, the company is expected to achieve a production capacity target of 150-200 million sets in 2023 and a production capacity target of 300 million sets in 2024.
The introduction of chip junction boxes enhances product competitiveness, reduces costs, increases efficiency, and increases profitability. As components move in the direction of larger sizes and higher power, the performance of junction boxes also needs to be improved urgently. Compared with the mainstream three-part diode junction boxes in the current market, the company has developed a three-part chip junction box. On the 1) performance side: the technical threshold is higher, the packaging process is involved, it can carry more current, and the heat dissipation capacity is stronger; 2) on the cost side: the chip junction box is extended upward, and the level of automation of the process has improved, and the cost optimization is significant on the basis of the diode junction box.
Profit forecasting and valuation
It was covered for the first time, and a “increase in holdings” rating was given. The company is a leading enterprise in the field of junction boxes. It has outstanding R&D capabilities, and product competitiveness is expected to continue to improve. With the release of new products and production capacity, the company is expected to usher in high-quality development. We expect the company's net profit from 2023-2025 to be 2.01 million yuan, 3.11 million yuan, and 461 million yuan per share, corresponding to EPS of 1.68, 2.59, and 3.84 yuan/share, respectively. Four component and auxiliary materials companies, Kuaike Electronics, Yubang New Materials, CITIC, and Ancai Hi-Tech, were selected as comparable companies. The average PE of comparable companies in 2023-2025 was 27, 18, and 13 times. The company was given a valuation of 27 times in 2023, corresponding to the target market value of 5.388 billion yuan, corresponding to the 17% increase in current stock prices, and given an “increase in holdings” rating.
Risk warning
Risk of fluctuations in raw material supply and prices; risk of fluctuations in the prosperity of downstream industries; risk of increased market competition; single risk of product structure.