Key points of investment
Incident: On March 8, 2024, the company announced that it had signed a “Cell Purchase Contract” with Jinko Energy and its subsidiaries; it intends to sign an investment cooperation agreement with the Ziyang Airport Economic Zone Management Committee.
A “Cell Purchase Contract” was signed with Jinko, and the annual purchase volume is about 10 GW. 1) Purchase volume: During the contract period (2024/1/1-2025/12/31), Anhui Shijing Solar Energy will sell approximately 2.5 billion solar monocrystalline cells/A-grade panels, including but not limited to 182 size solar cells (the specific execution quantity is based on the monthly purchase order volume). We estimate that 2.5 billion tablets are equivalent to 20 GW, and the annual purchase volume is 10 GW. Shijing Solar Phase I will be put into operation in stages according to two 9+9GW plants. The first 9GW will be put into operation at the end of December 2023. According to construction progress, we expect the second 9GW to be put into operation in 2024Q2. Jingke's annual procurement volume accounts for 56% of Shijing Solar Phase I's production capacity. 2) Purchase price: The monthly price of the two parties is based on the average price and market price published weekly on the PVInfoLink website. As of 2024/3/6, the PVInfoLink website shows that the average price of TopCon batteries (182 mm/ 24.5% +) is 0.47 yuan/W. Recently, battery manufacturers have experimented with increasing battery prices.
Jointly invested with Jinko in a project with an annual output of 20GW silicon wafers and 20GW cells to expand into the middle and downstream integration of photovoltaics. The company and Jingke Energy signed an “Investment Agreement for High-efficiency Solar Cell R&D and Production Project” with the Ziyang Airport Management Committee to invest in an R&D and manufacturing base with an annual output of 20GW silicon wafers and 20GW solar cells. 1) Project planning: Construction is divided into two phases. The first phase of the project produces 10GW silicon wafers and 10GW solar cells per year. The second phase is built according to project progress and market conditions. 2) Shareholding ratio: The company holds 90% of the shares and Jingke holds 10% of the shares; 3) Project progress: The project company has now been established, and construction of the first phase of the plant is scheduled to begin in April 2024. The company expects to complete the completion and completion of the first battery by the end of 2024Q4. 4) Funding arrangement: The company only pays for the purchase of equipment, which is settled through 35% of its own capital and 65% of its own funds. The construction costs of the project site, plant infrastructure, mechanical and electrical facilities are all funded by local governments. At the same time, the government will grant subsidies related to construction project subsidies, equipment purchase subsidies, rent subsidies, green power policy subsidies, talent subsidies, and repurchase subsidies.
Leading photovoltaic process pollution prevention and control equipment, integrated layout of midstream and downstream photovoltaic+new growth in carbon sequestration. 1) High increase in orders for environmental protection equipment: Since 2023, it has been announced that the total number of new tenders has exceeded 10 billion yuan (including consortia). The integrated model & industrial chain extension capacity verification have increased rapidly, and the value of a single GW has increased rapidly.
2) Integrated layout of cells+silicon wafers: Projects have been planned to produce 24GW TopCon batteries per year in Ningguo, Anhui and 20GW silicon wafers per year in Ziyang, Sichuan. The integration of silicon wafers and cells enhances competitiveness, and the original equipment business collaboration brings customer+cost advantages. ① Client: The company is a leader in the field of photovoltaic process polluting equipment and has accumulated a large number of customer resources for photovoltaic modules. ② Cost side:
Equipment operation and maintenance experience can reduce non-silicon costs. 3) Demand for carbon sequestration is expected to accelerate: With the advantages of catalytic technology accumulated in collaboration with the main business, carbon sequestration projects can capture flue gas CO2, dispose of steel slag, and make resource-based construction materials at low cost, a win-win situation for all parties. As of 2023Q3, 2 lines have been completed and put into operation, and 4 lines are under construction/proposed. As the carbon market expands, demand for carbon sequestration in cement steel will be released at an accelerated pace.
Profit forecast and investment rating: The high increase in orders for the company's supporting equipment establishes a solid foundation for performance; cell production gradually contributes to the increase, adding integrated production capacity increases long-term profits; demand for carbon sequestration is expected to accelerate.
The company predicts net profit of 180-245 million yuan in 2023. We maintain the 2024-2025 net profit forecast of 904/1,251 million yuan, corresponding to 9 or 7 times PE, and maintain a “buy” rating.
Risk warning: Orders fall short of expectations, project construction progress falls short of expectations, and industry competition intensifies.