Key points of investment:
Leading companies in photovoltaic welding belts are growing rapidly in volume and profit. Yubang New Materials, founded in 2002, entered the field of photovoltaic welding belts in 2007, and has now become a leading photovoltaic welding belt enterprise. Benefiting from the high demand in the photovoltaic market and the fluctuating decline in raw material prices, the company's performance has steadily rebounded. 2023Q3 revenue/net profit attributable to mother were $2,05/120 million, respectively, +41.9%/55.7% YoY.
Photovoltaic welding belt: The transformation of battery technology is driving the release of new welding belt products, and demand is expanding rapidly. (1) The downstream industry is booming, and demand for welding belts resonates at the same frequency. It is estimated that in 2023-2025, the global demand for photovoltaic welding belts will be 19.67/24.10/286,900 tons, and the CAGR will be 30% from 2022 to 2025. (2) The trend of thinning of welding belts is obvious, and high-premium products are expected to continue to be released. With breakthroughs in battery technology, the thinning of welding belts is beneficial to reducing costs and increasing efficiency. SMBB, low temperature welding belts, and flat welding belts will enjoy large-scale dividends along with the industrialization process of TopCon, HJT, and XBC. (3) The characteristics of “small industry, big market” are obvious, and the pattern of industry fragmentation is expected to focus on the head. Currently, the industry is fragmented. CR2 in 2022 is 27%. Funding requirements are combined with cost control and R&D advantages. The leading edge of the industry is obvious, and concentration is expected to increase further.
Competitiveness: Product structure continues to improve, and “cooperation+R&D” supports rapid growth. The company continues to invest in R&D, leading the industry in performance indicators, and has a forward-looking layout with new technology. At the same time, the company is one of the few enterprises with accumulated flat welding belt technology in the industry. It has a first-mover advantage in the XBC flat welding belt layout, and is expected to structurally improve the company's profit space with the release of new technologies such as SMBB, 0BB, and XBC welding belts; the company has built a unique “cooperation+R&D” mechanism, which is deeply tied to downstream leaders, and the closed loop promotes rapid technological progress, which is expected to increase the company's market share.
Profit forecast and investment advice: The company's 2023-2025 revenue growth rate is expected to be 40%/34%/25%, respectively, and net profit to mother is 1.64/2.77/372 million yuan, respectively. The current stock price corresponds to PE 28.6/16.9/12.6 times PE. The company is expected to significantly benefit from the iteration of welding belt technology brought about by the N-type wave. It will be given 22 times PE in 2024, corresponding to a target price of 58.63 yuan/share, covering the first time and giving it a “buy” rating.
Risk warning: Global PV demand growth falls short of expectations, new technology implementation falls short of expectations, new product release falls short of expectations, raw material prices fluctuate sharply, and capacity construction falls short of expectations.