Polymeric Materials is a leader in the photovoltaic silver paste industry, and revenue and profit continue to grow rapidly. The company's main products are silver paste for the front side of solar cells, mainly including silver paste for the main and secondary grid of P-type PERC batteries, and the main and secondary grid silver paste on the front and back of N-type TopCon and HJT batteries. In 2023, Juhe Materials achieved revenue of 10.290 billion yuan, +58.21% year over year; net profit to mother of 442 million yuan, +13.00% year over year.
The accelerated iteration of N-type batteries is expected to drive a sharp increase in silver paste volume. (1) N-type batteries such as TopCon penetrate rapidly, driving a high increase in silver paste usage. Since both TopCon and HJT batteries require the use of silver paste, silver paste consumption is greater than that of PERC batteries. According to CPIA, in 2023, the consumption of pure silver for p-type batteries was reduced to about 59 mg/tablet, and the consumption of back silver consumption was about 25 mg/tablet; the average consumption of double-sided silver paste (95% silver) for n-type TopCon batteries was about 109 mg/tablet; and the consumption of low-temperature silver paste on both sides of heterojunction batteries was about 115 mg/tablet. (2) The processing cost of N-type silver paste is higher than that of type P, which is expected to increase the profit center of silver paste. The pricing of photovoltaic silver paste products usually consists of a silver point price+processing fee. The processing fee directly affects the profitability of the enterprise.
The processing cost of PERC silver paste in the first half of 2023 is about 450-500 yuan/kg, TopCon silver paste processing fee is more than 200 yuan/kg higher than PERC silver paste processing fee, and HJT silver paste processing fee is about 800-1000 yuan/kg. (3) The localization process has basically been completed, and the competitive pattern of the industry is concentrated. With overseas silver paste companies such as DuPont and Samsung being acquired, the current positive silver paste market has basically been replaced by localization, and the domestic market share may exceed 95% in 2023. In terms of the competitive landscape, it is estimated that in 2022/2023, the three domestic companies Juhe, Dike, and Jingyin will have a combined share of the global silver market of 76%/82%. The industry has entered an N-type iteration period. Leading companies quickly achieve N-type slurry shipments with technological leadership, and the share of leading companies is expected to further increase.
The expansion of leading silver paste production capacity is accelerating the layout, and moving towards integration helps reduce costs. (1) The company's silver paste shipments grew rapidly, and the proportion of N-type silver paste continued to increase. In 2023, the company shipped 2002.96 tons of silver paste, an increase of 45.8% over the previous year, making it the first company in industry history to ship more than 2,000 tons of photovoltaic conductive silver paste per year. (2) Localization of silver powder helps reduce costs, and the introduction of domestic powder takes the lead. The company uses nearly 100% of domestic PERC paste powder, and TopCon slurry accounts for about 50% of domestic powder, which helps reduce the production cost of silver paste products and improve profitability. (3) Actively promote upstream layout to help improve product quality and reduce costs. In 2023, the company acquired Jiangsu Lianyin (now renamed Juyouyin), and its Yancheng base began self-supply of tonnage silver powder in September 2023. In addition, the company is building a high-end photovoltaic electronic materials base project in Changzhou, with a planned annual production capacity of 3,000 tons. In 2024, the company's powder supply and shipment volume is expected to reach 500 tons. When production capacity climbs to the kiloton level, the company expects a profit increase of about 100,000 yuan per ton of silver paste. In terms of quality, since the performance of silver paste products is directly affected by the quality of upstream silver powder, upstream silver powder can be manufactured to strengthen upstream and downstream links and carry out matching research and development, so that the quality of silver paste products can be better grasped.
Investment suggestion: The company is a leader in photovoltaic silver paste. Production capacity and shipping scale continue to increase. At the same time, the upstream layout further reduces costs and improves quality. As the share of N-type paste shipments increases, it is expected to drive a high increase in performance. We expect the company's net profit to be 6.9/8.2/940 million yuan in 2024-2026, respectively, and the current market value corresponding to PE is 14/12/10 times, respectively. Referring to comparable company valuations, 17x PE was given in 2024, corresponding to a target price of 71.04 yuan. It was covered for the first time, and a “recommended” rating was given.
Risk warning: PV demand falls short of expectations, the company's production capacity release falls short of expectations, competition intensifies risks.