The company announced its full year results for '23, with revenue of HK$26.6 billion, +30% YoY; net profit to mother of HK$4.2 billion, +10% YoY. Of these, 23H2 revenue was HK$14.5 billion, +34% YoY, +19% month-on-month; net profit to mother was HK$2.8 billion, +46% YoY, +101%.
The profitability of 23H2 photovoltaic glass improved significantly from month to month, and competitive advantages such as scale continued to increase. In '23, the company's PV glass revenue was HK$235 billion, +33% year over year; gross margin was 21.4%, -2.4 pct year on year. 23H2's revenue was HK$13 billion, +35%/+23% YoY; gross margin was 26.4%, +5.2/+11.2pct YoY respectively. Revenue growth momentum was strong, with prices contributing slightly (according to Zhuochuang information, the average price of 23H2 3.2mm coated glass was 26.4 yuan, +0.4 yuan month-on-month). The main driving factor was rapid sales growth due to increased production capacity (23H2's photovoltaic glass sales volume +64% YoY and +53% month-on-month; the daily melting volume of the company's photovoltaic glass at the end of '23 was 25,800 t/d, vs 19,800 t/d at the end of '23). The gross margin of 23H2's photovoltaic glass business improved significantly month-on-month, or mainly due to the better supply and demand environment. Prices were basically stable and slightly better, and the main cost factors declined to a certain extent (for example, the average price of 23H2 soda ash per ton was 2,763 yuan, -114 yuan/ -4% year over year, -46 yuan/ -2% month-on-month). The company's production expansion maintained its intensity. At the end of 23, the company's domestic photovoltaic glass market share was 24.0%, +0.4 pct. It is expected that production expansion intensity will continue to be good for 24 years (the company plans to start a new production capacity of 6,400 t/d in 24, including 4 lines in Anhui and 2 lines in Malaysia).
The scale of new grid-connected photovoltaic power plants reached a record high in '23, and the profitability of photovoltaic power generation declined slightly. 23 The company's solar power generation revenue was HK$3 billion, +8% year over year, gross profit margin of 68.5%, and -1.9 pct month on month; of these, 23H2 revenue was HK$1.5 billion, +25% year over month, -1% month on month, gross margin was 66.6%, -0.7 pct year on year, and -3.8 pct month on month. In '23, the company added a record high of 1,094 MW of grid-connected capacity, with large-scale ground projects accounting for 89%. At the end of 23, the company accumulated a total grid connection scale of 5,944MW (5,541 MW is a centralized project). Due to electricity restrictions and energy storage safety regulations, the gross margin of 23H2 solar power generation declined slightly. The company expects to add 300MW of grid-connected installed capacity in '24.
Growth has maintained intensity, valuations have advantages, maintaining the “buy” rating companies' leading position in photovoltaic glass continues to strengthen, and capacity expansion maintains competitive advantages such as intensity and cost or continues to strengthen. At the same time, the market may underestimate the company's future market layout in terms of power plants, silicon materials, etc. We expect the company's 24-26 revenue to be HK$340/408/47.1 billion, respectively, or +28%/+20%/+16% YoY; net profit to mother will be HK$55/76/9.3 billion, respectively, or +32%/+37%/+23% YoY. Referring to comparable company valuation levels, the company was given a target PE of 15 times in 24 years, with a target price of HK$9.30 to maintain a “buy” rating.
Risk warning: The supply and demand boom is lower than expected; the prices of the main cost factors fluctuate greatly; the company's strategic promotion effect is lower than expected.