The company released its 2023 annual report. The performance increased 30% year on year. The company's photovoltaic glass sales grew rapidly, the release of new production capacity strengthened the company's competitiveness, glass entered the inventory removal cycle, and the industrial chain was preparing to increase prices or increase profits, and maintained an increase in holdings rating.
Key points to support ratings
Profit in 2023 increased 30% year on year: The company released its 2023 annual report and achieved annual profit of 2,760 billion yuan, an increase of 30.00% year on year; after deducting nonprofit of 2,694 billion yuan, an increase of 29.87% year on year. According to the performance calculation, the company achieved profit of 791 million yuan in 2023Q4, an increase of 27.91% year on year and a decrease of 10.48% month on month; after deducting non-profit, 748 million yuan, an increase of 23.63% year on year and a decrease of 14.59% month on month.
Photovoltaic glass sales continued to grow rapidly: The company benefited from the release of new production capacity and the booming development of the photovoltaic industry in 2023. Photovoltaic glass production and sales grew rapidly, achieving annual sales of 1,220 billion square meters of photovoltaic glass, an increase of 49.52% over the previous year. In addition, the company achieved annual photovoltaic glass revenue of 19.677 billion yuan, a year-on-year increase of 43.82%, gross profit margin of 22.45%, and a year-on-year decrease of 0.87 percentage points.
The expansion of high-quality production capacity enhances the company's competitive strength: By the end of 2023, the company has a photovoltaic glass production capacity of 20,600 tons/day. In 2024, the company will gradually ignite and operate the Anhui Phase IV project and the Nantong project, with an additional production capacity of 9,600 tons/day. By the end of 2024, the company's photovoltaic glass production capacity is expected to increase to 30,200 tons/day, an increase of about 50% over the previous year. In addition, the company plans to invest in the construction of photovoltaic glass kilns in Indonesia to meet the demand for photovoltaic glass in different countries and regions. The company is expected to continue to lead in the field of photovoltaic glass with its scale advantage, resource advantage and technical advantage.
Glass has entered the inventory removal cycle, and the industrial chain is preparing to increase prices or increase profits: after the 2024 Spring Festival, PV module production schedule heats up, and photovoltaic glass enters the inventory removal stage. We believe that the phased supply of photovoltaic glass falls short of demand or pushes up the price of photovoltaic glass. With the month-on-month increase in PV module production schedules in April, some module companies may prepare goods ahead of time to control costs, and the price of photovoltaic glass may rise, driving up the profit level of leading photovoltaic glass manufacturers.
valuations
Based on the company's annual report's disclosure of production capacity plans, current glass inventory removal, and price increases in the photovoltaic glass industry chain, we adjusted the company's 2024-2026 earnings forecast to 1.52/1.95/2.36 yuan (the original 2024-2026 forecast was 1.70/2.13/- yuan), corresponding to a price-earnings ratio of 18.9/14.7/12.2 times; although profit expectations were conservatively lowered, we are still optimistic about leading glass sector targets where supply is relatively scarce, and maintain an increase rating.
The main risks faced by ratings
The industry's production capacity release exceeded expectations; double glass penetration rate fell short of expectations; product price competition exceeded expectations; downstream demand fell short of expectations; raw material and fuel power prices fluctuated; and PV policy risks.