Incident: The company released its 2023 annual report. In 2023, it achieved operating income of 19.721 billion yuan, up 1.39% year on year, and achieved net profit of 1,816 billion yuan, up 8.80% year on year, in the middle range of the performance forecast (17.6 to 1.92 billion yuan); 2023Q4 achieved operating income of 3,964 billion yuan, a decrease of 25.58% year on year, and realized net profit of 166 million yuan year on year, a decrease of 62.10% month on month.
PV shipments & profits grew rapidly, magnetic material performance contributed steadily, and lithium battery market share increased against the market. In 2023, the company achieved a steady increase in all business segments: the PV sector achieved total shipments of 9.95 GW, a year-on-year increase of 24.27%, and the implementation of market-side differentiation strategies guaranteed the maintenance of a high-profit European market share, driving a 6.35 pct to 21.21% year-on-year increase in gross margin; in the context of increased competition in the industry, magnetic material shipments increased 7.87% to 198,500 tons year on year. Under the pressure of falling product prices, gross margin still increased 2.79 pcts to 26.49% year on year. Performance contributions remained stable; companies in the lithium battery sector achieved a reverse market share increase through continuous expansion of production capacity and increase in product lines. Shipment volume increased 75.36% year over year to 340 million units, but gross margin decreased by 13.44 pcts to 6.93% year over year due to falling raw material prices and increased competition.
TopCon's production capacity construction continues to increase, and PV product shipments are expected to increase by 50% year-on-year in 2024. On the basis of adding 6GW TopCon batteries and 5GW TopCon module production capacity in 2023, the company plans to actively promote the construction of projects such as Sichuan Dongji Phase II 6GW TopCon batteries, Lianyungang Dongji Phase II 5GW TopCon modules, and Southeast Asia 2GW TopCon batteries in 2024. At the end of 2023, the company's TopCon battery conversion efficiency exceeded 26.0%, and the cost reached the industry's first tier. The G12RT version of the new N-type Topcon module launched reached a maximum power of 615W, and the conversion efficiency reached 22.8%. On the basis of the continued implementation of TopCon's production capacity, the steady increase in TopCon product efficiency and power, and the continued promotion of market differentiation strategies, the company strives to increase PV product shipments by 50% year-on-year in 2024, providing strong support for performance growth.
Lithium battery shipments strive to increase by 50% year on year, and the magnetic materials industry is actively promoting deep internationalization. In the lithium battery industry, in the context of the completion and commissioning of the 6 GWh project in 2023, the company actively launched the 21,700 series products to meet the needs of different application markets and different customers. The market side achieved a steady increase in market share in motorcycle products and energy storage products. At the same time, it achieved breakthroughs in tools and cleaning products, and strived to increase lithium battery shipments by 50% year-on-year in 2024. In the magnetic materials industry, the company will increase its advanced production capacity layout in its headquarters, Guangxi, Vietnam and other places. In 2024, it will promote the implementation of magnetic materials projects in Vietnam and Thailand to accelerate the internationalization of the magnetic materials industry.
Maintaining a “buy” rating: The company's magnetic materials business is developing steadily, and the photovoltaic and lithium battery business has achieved rapid scale expansion through technological progress and product differentiation strategies, but in the context of increased competition, product prices and profits will face great pressure in 2024/25. As a prudential measure, the company's profit forecast for 24/25 was lowered. The company is expected to achieve net profit of 18.51/20.71/2291 billion yuan in 24-26 (30% down/ 37% /increase). The current stock price is 13 times PE in 24. We are optimistic about the long-term development potential brought by the company's diversified business layout and differentiation strategy, and maintain a “buy” rating.
Risk warning: risk of fluctuations in raw material prices, risk of fluctuations in downstream demand, risk of increased market competition.