Description of the event

The company released its 2023 annual report: achieved annual revenue of 6.595 billion yuan, up 31.12% year on year; realized net profit of 395 million yuan, down 3.50% year on year; deducted net profit of 192 million yuan, up 88.38% year on year.

Equivalent to Q4, we achieved revenue of 1,864 billion yuan in a single quarter, an increase of 12.48% year on year; realized net profit of 197 million, an increase of 32.96% year on year; net profit after deducting non-vested net profit of 102 million yuan, an increase of 31.22% year on year.

Incident comments

Sales increased significantly throughout the year, and gross margin was stable. The company's revenue also increased by 31.12%, mainly due to the increase in photovoltaic glass production and sales after the expansion of production capacity. In 2023, the company sold 364 million square meters of new energy glass, an increase of 58.98%; achieved revenue of 6.38 billion yuan, an increase of 36.67% over the previous year. Other functional glass sales volume was 6.94 million square meters, down 42.90% year on year, mainly due to the official discontinuation of production of the Northern Glass float production line in June 2023; revenue reached 150 million yuan, down 51.94% year on year. The gross profit margin for the whole year was 11.58%, a year-on-year decrease of 0.27 pct. Among them, the gross margin of the new energy glass sector increased by 0.17 pct year on year due to enhanced cost control, and other functional glass decreased 15.72 pcts year over year due to the decline in the float boom. The cost rate for the whole year was about 7.5%, a year-on-year decrease of about 0.3 pcts. Among them, management and finance rates decreased by about 0.3 and 0.3 pcts, respectively, and the R&D rate increased by 0.4 pcts. Furthermore, due to increased government subsidies, the current period achieved other income of 235 million yuan, an increase of 78 million over the previous year; asset disposal income of 45 million yuan; in addition, income from equity disposal during the same period last year was 161 million, which is less in the current period. In the end, attributable net profit decreased by 3.5% year on year, while deducted non-performance increased by 88.38%, corresponding deducted non-net interest rate of 2.9%, an increase of 0.9 pct year over year.

Non-net interest rates for the fourth quarter all increased year over month. The company's Q4 revenue increased 12.48% year on year, and the decline in growth rate may be mainly affected by the Fujian Taibo merger base for the same period. Q4 achieved a gross profit margin of 11.8%, down 2.3 pcts year on year, and a slight decrease from month to month. The rate during the Q4 period was 6.9%, down 0.1 pct from the previous year. Among them, sales, management, and finance rates decreased by 0.2, 0.5, and 0.6 pcts, respectively, and the R&D rate increased by 1.2 pcts; Q4 other income increased by 115 million yuan, investment income decreased by 43 million, and asset disposal income increased by 36 million. In the end, an attributable net interest rate of 10.6% was achieved, an increase of 1.6 pcts over the previous year; a net interest rate of 5.5% deducted from non-attributable net interest was achieved, an increase of 0.8 pcts over the previous year.

The integration of photovoltaic glass and the acceleration of new construction. As of 2023, the company's production capacity of photovoltaic glass raw sheets was 5270 tons/day, an increase of about 13% over the previous year. Among the projects currently under construction, the main project of the Yixing New Energy Project has been completed and put into operation in 2023, and new construction projects such as Luoyang New Energy and Northern Glass are continuing to advance according to the planned schedule. The company's photovoltaic rolled glass production is expected to continue to grow at a high rate in the next few years, and as the scale expands, the unit cost is expected to drop rapidly.

The consolidation of thin-film battery assets has begun to advance. The company previously managed 55% of Chengdu China Building Materials Optoelectronic Materials Co., Ltd., 45% of Ruichang China Building Materials Optoelectronic Materials Co., Ltd., and 60% of Kaisheng Photovoltaic held by Kaisheng Technology Group. In the future, the company will acquire shares in the target company in due course according to its strategic layout and business development needs to further expand the company's business scale and market competitiveness. Considering Kaisheng Technology Group's production capacity planning and the background of central enterprises, it is expected to become the domestic leader in thin-film batteries in the future.

Investment suggestions: The Group's “3+1” strategy continues to advance, and the company will focus on developing related business in the future as a new energy materials platform.

The estimated net profit for 2024 is approximately 550 million, 6 times PE for Hong Kong stocks and 15 times PE for A-shares, with a buying rating.

Risk warning

1. The progress of PV asset integration is low and expectations are low;

2. The production capacity of photovoltaic glass exceeded expectations.