Key points of investment
The improvement in the supply and demand of photovoltaic glass supports the stabilization of the price of photovoltaic glass:
Since the second half of 2023, the National Development and Reform Commission and the Ministry of Industry and Information Technology have effectively implemented the PV glass production capacity warning policy in the context of the hearing policy. The new ignition production capacity in 2023 is significantly lower than expected. It is expected that domestic new production capacity for photovoltaic glass will be limited in 2024, the relationship between PV glass supply and demand will further improve in 2024, and the industry will return to healthy and healthy development. Also, from the raw materials and fuel cost side, excess soda ash production capacity will put downward pressure on prices, and natural gas costs will also drop year-on-year in 2024, which is conducive to further reducing photovoltaic glass production costs. As the operating rate of the PV industry chain recovers in the second quarter, the current inventory will be effectively digested and the price of photovoltaic glass will be supported.
The advantages of expanding production at home and abroad are significant, and the 2024 plan is to increase production capacity by 6,400 tons:
In 2023, the company added 6 new 1000 tons of production capacity. By the end of 2023, the company's total daily melting capacity reached 25,800 tons. In 2024, the company plans to add 6 new production lines, including 4 1,000-ton production lines in Wuhu, Anhui, which are expected to be put into operation by the end of the 3rd quarter; Malaysia will add 2 additional 1,200-ton production capacity, which is expected to be put into operation in the first half of the year. After additional production capacity at home and abroad is put into operation in 2024, the company's daily melting capacity is expected to increase to 32,200 tons by the end of 2024. The company's effective melting volume in 2024 increased by about 35.2% compared to 2023, leading to continued growth in PV glass sales.
PV power plants are being connected to the grid faster, and polysilicon is expected to start contributing to profits in the second half of the year:
The company added a record high of 1,094 MW of grid-connected power plants in 2023. By the end of 2023, the company's cumulative grid-connected power plant revenue was close to 6 GW, leading to an 8.2% year-on-year increase in photovoltaic power plant revenue in 2023; while the company holds 52% of the shares, the first phase of 60,000 tons in Qujing, Yunnan, will be put into operation in 2024Q2. Under the company's industrial synergy, it is expected to achieve a reasonable return on revenue after prices recover.
Updated target price of HK$8.16 to maintain buy rating:
We updated our target price to HK$8.16, which is equivalent to 14 times and 10.8 times PE in 2024 and 2025. There is room for a 38% increase in the target price compared to the current price, and the purchase rating is maintained.