Core views
The company started an environmental waste gas treatment business, gradually improved the pollution control business layout, and deepened the environmental protection equipment market. Relying on carbon neutrality industry trends in recent years, the company has entered new fields such as carbon sequestration and TopCon batteries with its own deep accumulation in process pollution prevention and control. The company's TopCon battery team is experienced, and Ningguo's first phase 18GW TopCon battery project is expected to reach full production in 2024Q3. The business model and layout of the company's carbon sequestration business is also in a leading position in the industry. Carbon capture and sequestration (CCUS) has broad prospects for future carbon neutrality. The company's traditional business is highly competitive and has stable profitability. New businesses such as TopCon batteries and carbon sequestration have a lot of room in the future. The current valuation is low, and it is expected to be repriced by the market.
summary
The environmental protection equipment business is the cornerstone, and the photovoltaic cell+carbon sequestration business has become a new growth pole. The company's business is divided into three segments: environmental protection equipment, carbon sequestration business, and photovoltaic cells. The company started an exhaust gas treatment business, gradually improved the pollution control business layout, and deepened the environmental protection equipment market. Relying on its deep accumulation in process pollution prevention and control, the company has entered new fields such as carbon sequestration and TopCon batteries with customer resources in the photovoltaic, cement, steel and other industries.
The carbon sequestration business (CCUS) adapts to the carbon neutral and general trend, and card slots are pioneering a new model in the industry. Achieving carbon neutrality goals requires not only reducing carbon emissions at the source and replacing traditional energy with new energy sources, but also capturing necessary carbon emissions through carbon sequestration. The future of the carbon sequestration market is broad. We predict that the market space for carbon sequestration will reach 216.450 billion yuan in 2025/2030. Currently, the company is one of the few companies in the carbon sequestration market that can reuse carbon dioxide and achieve profit, and has a card position advantage. 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.
TopCon Battery is a dark horse. The team is experienced, the latecomer has obvious advantages, and the cost is leading the industry. The company entered the photovoltaic cell industry in 2023. We believe that the main reasons why the company can stand out are: 1) the environmental protection system empowers production safety while effectively reducing costs and increasing efficiency; 2) the core team has rich talent reserves and brings together outstanding talents in the industry. 3) It is expected that new cooperation will be formed based on the customer base accumulated by the main business. In terms of production capacity, the first phase of the company's Ningguo 18GW project is expected to be fully produced in Q3 in '24, and the annual shipment volume is expected to reach 13-15 GW in '24.
TopCon's battery supply may be tight, and the company has a cost lead. On the demand side, TopCon's demand accounts for over 80% of large-scale component tenders in 2024. We believe there is no oversupply of TopCon batteries this year, and the profit margin is expected to be repaired. The company uses advanced equipment in the industry, the management team is experienced, the latecomer's advantage is obvious, and the cost control capability is in a leading position in the industry.
The environmental management business has blossomed a lot to maintain 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, cement, automobiles, etc. 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 a leading manufacturer in process pollution prevention and control. The main business is highly competitive and has stable profitability. The TopCon battery business will contribute to increased performance in 2024. We expect the company's 2023-2025 net profit of 2.1, 650, and 800 million yuan, corresponding to PE valuations of 39.9, 12.9, and 9.5 times on March 18, 2024, maintaining a “buy” rating.