Core views
The company received a large order for top TopCon components, and agreed to deliver about 20GW in two years, with an average of 10GW per year, proving that the company has been recognized by leading customers in terms of TopCon battery efficiency, cost, yield, etc., and the product quality is excellent. The company's Ningguo base has been put into operation, and production is expected to be completed in 2024Q3. The Ziyang base is expected to be put into operation by the end of the year. Subsequent production capacity will continue to increase, and the company's TopCon battery business will soon enter the harvest period. In addition, the company's carbon sequestration business has a first-mover advantage, and the subsequent industry space is broad. At the same time, the environmental protection business can provide the company with a basic profit market.
occurrences
The company received a large order for leading TopCon components, and plans to further expand production in Ziyang. The order agreed that from January 1, 2024 to December 31, 2025, the company would sell about 2.5 billion 182 TopCon batteries/Class A chips to Jinko Energy.
In addition, the company plans to invest in the construction of a 20GW silicon wafer+20GW battery project with Jinko in Ziyang, Sichuan. The first phase of the 10GW silicon wafer+10GW battery is scheduled to start construction in April 2024, and the 2024Q4 will be completed and the first battery will be rolled out.
Brief review
TopCon batteries have been recognized by leading customers, and production capacity expansion continues to accelerate the company's signing of 2.5 billion TopCon battery orders with Jinko. Based on the 8.3W power of a single chip, the corresponding wattage for the order is about 20.8 GW, with an average of 10.4 GW per year. The company's Ningguo TopCon base has a nominal production capacity of 18GW. After improving efficiency, the actual production capacity is expected to reach 20GW+, and production is expected to reach full capacity in Q3 2024. Construction of the 20GW plant in Ziyang, Sichuan recently began. The first phase of 10GW silicon wafer+10GW TopCon batteries is expected to be put into production by the end of this year. We expect the company's TopCon battery shipments to reach around 15GW in 2024.
TopCon battery supply continues to be tight, profits are expected to recover
Currently, the PV industry's demand-side TopCon penetration rate is 80%-100%, and the supply-side penetration rate is only 60%-70%. We expect TopCon battery supply to remain tight in 2024.
The company received a large order for Jingke TopCon batteries, indicating that the company's battery efficiency and various aspects of quality have been recognized by first-line customers, and delivery certainty is strong. At the same time, the company's TopCon battery costs are at the leading level in the industry, and profits are expected to remain strong in 2024.
Currently, the company has a large carbon sequestration business space. The company's advance card slot layout is one of the few companies in the carbon sequestration market that can reuse carbon dioxide and achieve profit, and has the advantage of card slots. Judging from the business model, the company can achieve profit through carbon trading+carbon sequestration product sales+equipment/engineering sales. Under the dual carbon target, the company's carbon sequestration business is expected to be discovered quickly, contributing to increased performance.
The environmental management business has blossomed more and maintained the company's basic market
The environmental management business is the cornerstone business of the company. The company's products are widely used in various industries such as electricity, steel, photovoltaics, semiconductors, mud, and automobiles. The company has abundant order reserves. Since 2023, the company has won 2,653 billion yuan in orders for the PV and new energy industry alone. We believe that the company's environmental management business is expected to continue contributing to revenue and stabilizing the company's basic market.
Profit forecast: The company is expected to achieve net profit of 2.1, 650, and 800 million yuan in 2023-2025, respectively. Corresponding to the current PE valuation, it is 40.29, 13.04, and 9.62 times, and covered for the first time to give it a “buy” rating.
Risk analysis
1. The impact of downstream industry demand falling short of expectations. The company is a leading manufacturer in process pollution prevention and control. The traditional business has strong competitiveness and stable profitability. If downstream industry demand falls short of expectations, it may have a great impact on the company's revenue and profits.
2. The impact of TopCon's production capacity release falls short of expectations. The company's Ningguo 18GW TopCon project is still under construction. If the company's Ningguo 18GW project cannot be completed 24 years ago, it will have a great impact on the company's revenue and profits.
3. The impact of increased competition in the industry. If competition in the industry intensifies in the future, the company's profitability will be adversely affected. Sensitive estimates: Under pessimistic expectations, the company will ship 12 GW of photovoltaic products in 2024, with a net profit of about 0.01 yuan per watt. In 2024, the company's net profit to mother will decrease by 130 million yuan.