The 4Q23 earnings forecast is in line with market expectations
The company announced its 2023 performance forecast: net profit for the full year of 2023 was 5.27 to 5.83 billion yuan, +43.3% ~ +58.4%, corresponding to 4Q23 net profit of 195-750 million yuan, -84.7% ~ -41.3%, and -87.3% ~ -51.2% month-on-month. 4Q23 net profit after deducting non-return to mother was 349 million yuan to 925 million yuan, -71.5% ~ -24.5% year-on-year, and -75.2% ~ -34.3% month-on-month. We expect 4Q fixed asset and inventory impairment losses to have a certain impact on profit due to mother, and operating profit is in line with market expectations. In terms of shipment, we expect 4Q23 to ship 20GW+ components, more than +10% month-on-month, and distributed shipments of about 3GW, which is basically stable month-on-month. In terms of profit, we expect 4Q23 module profit per watt to be about 5-6 points, distributed profit per watt is about 2 gross, and unit profit shrinks due to falling component prices.
Key points of interest
Production capacity: N-type ratio increased, overseas layout involved Southeast Asia, the United States and the Middle East. We expect the company to have a 50/50/75/95GW production capacity by the end of 2023, including 40GW for N-type Topcon batteries. In terms of overseas production capacity, the company currently has an integrated production capacity of 6.5 GW silicon wafer modules in Southeast Asia, and plans to expand production of 5GW silicon batteries. Indonesia plans to lay out 1GW battery modules in a joint venture, and the US plans 5GW modules. We expect to land in 24-25. The UAE will lay out 50,000 tons of silicon, 30GW silicon and 5GW battery modules after 25 years, and the global supply capacity has increased significantly.
I am optimistic that the company's sharp increase in US shipments will guarantee a basic profit market. The US Energy Administration (EIA) January report predicts that the US will increase the number of centralized new installed capacity by more than 60% year on year in 2024; according to BNEF, 45.6 GW of imported components from January to October 2023 was +113% year-on-year, and there is already a stocking trend. We expect the company to ship 4-5 GW in the US in 2023 and 7-8GW in 2024.
The profit level of the distributed photovoltaic business is relatively stable. We expect the company to distribute 3GW+ shipments in 4Q23, with a profit of about 2 gross per watt, and a relatively stable profit level. On the industry side, we expect 42-44 GW of domestic household PV installations to increase in 23, which is about +70% over the same period last year. Looking ahead to 2024, we believe that some highly saturated markets will begin to implement the “booster confluence+Taiwan storage” model, which is expected to raise transformer capacity limits, and the southern region will maintain rapid development. We expect the company's distributed shipments to grow at a rate of about 40% in '24, contributing about 1.5 billion yuan to net profit, and smoothing the company's component performance fluctuations.
Profit forecasting and valuation
Due to the decline in industrial chain prices exceeding expectations, we lowered 2023/2024 net profit 17%/46% to 55.6/4.67 billion yuan, introduced a net profit forecast of 6.28 billion yuan for 2025, maintained an industry performance rating, switched to 24, and lowered the target price by 19% to 32 yuan, corresponding 15/11 times P/E in 2024/2025. There is room for 39% increase from the current target price. The current stock price corresponds to 11/8 times P/E in 2024/2025.
risks
PV demand falls short of expectations, US trade policy risks, and industrial competition worsens.