Core views
The company released its 2023 annual report, achieving net profit of 386 million yuan for the whole year, an increase of 2326.05% over the previous year. Among them, Q4 achieved net profit to mother of 93 million yuan in a single quarter, an increase of 395.41% over the previous year. The company's N-type silver paste is progressing rapidly. The proportion of Q4 N-type silver paste is close to 80%, increasing rapidly from month to month. In addition to TopCon silver paste, the company's new products such as LECO silver paste, HJT silver paste, and BC silver paste have all entered the industrialization stage. The company's market share grew rapidly during the reporting period, rising from 18% in 2022 to 36.6% in Q4 2023, and its position in the industry improved markedly. The Q4 company's gross profit per kg increased month-on-month, mainly due to the increase in the share of TopCon silver paste with higher processing costs, but the net profit per kg declined month-on-month. The main reason was that Q4 caused more R&D expenses, investment losses due to the effects of bank points and exchange rate fluctuations, and credit impairment losses on accounts receivable calculated in accordance with accounting standards after the expansion of business scale dragged down performance. As the penetration rate of TopCon and LECO silver paste continues to increase, the company's silver paste volume is expected to rise sharply.
occurrences
The company released its annual report. The company's revenue for the full year of 2023 was 9.603 billion yuan, up 154.94% year on year; net profit to mother was 386 million yuan, up 2326.05% year on year. The company's revenue for the 2023Q4 single quarter was 3.506 billion yuan, up 203.41% year on year, up 33.74% month on month; net profit to mother was 93 million yuan, up 395.41% year on year, up 3.37% month on month.
Brief review
The company's N-type silver paste progressed rapidly, and the share of the company's N-type silver paste increased rapidly during the reporting period.
The proportion of Q4 N-type silver paste shipments is close to 80%, increasing rapidly from month to month. During the reporting period, the company continued to increase R&D efforts. R&D expenses increased 169% from 115 million yuan in 2022 to 310 million yuan in 2023. In addition to traditional TopCon silver paste, new products such as TopCon battery silver paste, HJT silver paste, and BC silver paste equipped with LECO technology have all entered the industrialization stage.
The company's silver paste market share grew rapidly during the reporting period, and its position in the industry improved markedly. According to the 2022 to 2023 silver paste unit consumption was 11.5 and 11.2 mg/W, respectively, and battery production was 350 and 590 GW, respectively. The corresponding silver paste demand was 4,000 and 6,600 tons, respectively. The corresponding company's market share was 18% and 26% respectively. Among them, Q4's market share in a single quarter has reached 36.6%, a significant increase.
The month-on-month increase in gross profit per kg of silver paste in Q4 was mainly due to an increase in the share of TopCon silver paste with higher processing costs; while Q4's net profit declined month-on-month, mainly because Q4 caused more R&D costs+investment losses due to the effects of bank points and exchange rate fluctuations, and credit impairment losses on accounts receivable calculated in accordance with accounting standards after business scale expansion dragged down performance.
As the penetration rate of TopCon and LECO silver paste continues to increase, the company's silver paste volume is expected to rise sharply. Currently, TopCon and LECO silver paste processing costs still have a significant premium compared to PERC silver paste. As the share of N-type product shipments increases, the company's average gross profit and net profit per kg is expected to continue to increase.
Investment advice: Silver paste is a rare step in the photovoltaic industry chain, and the company's N-type products are technologically advanced, benefiting mainly from the rapid transformation trend of N-type batteries. The company's revenue for 2024-2026 is expected to be 133.2, 152.1, and 16.71 billion yuan, respectively, of which silver paste shipments are 2,500, 2900, and 3200 tons, respectively, and corresponding operating income is 129.1, 148.1, and 16.30 billion yuan respectively; the company's gross margin for 2024-2026 is 12.0%, 11.0%, 10.8%, and net profit to mother is 6.8, 6.9, and 740 million yuan, respectively. The year-on-year growth rates are 75%, 3%, and 6%, respectively. 6.9 and 7.3 yuan, the PE corresponding to the closing market value on March 6 was 11.7, 11.4, and 10.8 times, respectively.
Risk warning: 1. Competition in the industry is intensifying. In the silver paste process, due to low capital expenditure, rapid expansion of production capacity, and high production capacity flexibility, if new silver paste technology spreads rapidly, silver paste processing costs may drop rapidly; 2. There is a risk that raw material costs will fluctuate drastically. Referring to the 2022 polymer and material cost structure, silver paste accounts for more than 99% of direct material costs, mainly silver powder and silver ingots. If the cost of silver powder and silver ingots rises by 10%, the company's gross margin will also drop by about 10%; 3. Risk of exchange rate fluctuations. The company previously generated some US dollar loans in the process of importing silver powder from overseas. If the US dollar appreciates rapidly in the short term, the company may incur exchange losses; 4. There is a risk that the unit consumption of silver paste for photovoltaic cells will drop rapidly. Currently, the silver paste single consumption of N-type batteries is significantly higher than that of P-type batteries. Currently, the silver consumption (front) of mainstream P-type batteries is 5.8-7.5 mg/W, TopCon silver consumption is about 13 mg/W, and HJT batteries are around 20 mg/W. Therefore, we expect that the increase in the penetration rate of N-type batteries will drive an increase in silver paste unit consumption, but if the silver paste unit consumption of N-type batteries declines rapidly, the silver paste industry's market space growth rate may fall short of expectations, affecting the company's silver silver paste shipments; 5. Demand in the photovoltaic industry falls short of expectations. We forecast the company's shipments based on demand in the PV industry maintaining a growth rate of about 20% in the next few years. If demand in the PV industry falls short of expectations, the company's silver paste shipments may also fall below our forecast value; 6. There is a risk that operating cash flow will continue to be negative. Since the customer payment period is longer than the raw material procurement payment cycle in the silver paste process, operating capital requirements will continue to expand as the company's business scale expands, which may cause the company's operating cash flow to continue to be negative.