Core views
Granular silicon: forward-looking layout, continuous breakthroughs, rapid expansion of production, excellence through the core competitiveness of this cycle - balance between quality and cost. Through reviewing the historical cycle of polysilicon, we found that most of the polysilicon production capacity that was previously forced to stop production, cut production, or withdraw from the market is high-cost old production capacity, so low cost in the downturn cycle is a guarantee for the survival of enterprises. However, in this cycle, the rapid increase in N-type share places higher demands on silicon quality, which is limited by the limited supply of high-quality upstream silicon materials. Currently, there is an oversupply of overall production capacity, but local supply and demand conflicts still exist. Therefore, we believe that having products with both high quality and low cost is the core competitiveness of polysilicon companies to get through the cycle.
GCL granular silicon has achieved a balance between low cost and high quality, and can promote carbon reduction in the industrial chain.
Currently, the cost of granular silicon is nearly 10% lower than rod-shaped silicon, and there is still room for cost reduction in the future. The production cost of granular silicon has been reduced to 35.9 yuan/kg, while the production cost of rod-shaped silicon is about 39.12 yuan/kg. Currently, the cost of granular silicon is nearly 10% lower than rod-shaped silicon. The quality continues to improve, and 83% can be used for N-type crystals. Granular silicon currently accounts for 83% of N-type material shipments. For granular silicon with a metal content of less than 0.5 ppbw, a ratio of 60% is applied to N type N. At the same time, the turbidity of GCL's granular silicon has now been fully controlled within 120 NTU, and the proportion of granular silicon products below 100 NTU is as high as 70%. In the future, as turbidity continues to decrease, the breakage rate will continue to improve. Assist the industrial chain to reduce carbon at the source of materials.
Carbon emissions from the silicon material process account for nearly half of the total carbon emissions of components, and the use of granular silicon can significantly reduce carbon emissions from components. GCL granular silicon has obtained a carbon footprint certification issued by the French National Energy Agency. The carbon footprint value for every 1 kg of granular silicon produced is only 37 kg of carbon dioxide equivalent, driving the entire photovoltaic industry chain to continue to reduce carbon emissions by 28%.
The company fully focuses on granular silicon, with a market share of over 15%. It is expected that the granular silicon production capacity will reach 500,000 tons in 2024, and construction of the Middle East project is expected to commence. The company already divested its rod-shaped silicon assets in 2023 to focus fully on granular silicon. The company has four major domestic bases for granular silicon, with a nominal production capacity of 420,000 tons. It is expected to achieve 500,000 tons of granular silicon production capacity by the end of 2024, and construction of production capacity in the Middle East is also expected to begin in 2024.
CCZ: Next-generation crystal technology, leading innovation and cost reduction
The company continued to break through CCZ in 2023. The yield of a single crystal drawing furnace has exceeded 185 kg/day, and has achieved a pilot production capacity of 200 MW. At present, it has achieved the average lifespan of CCZ N-type crystal rod heads and oxygen content close to the RCZ pull-crystal process level during the same period. We believe that as CCZ technology matures, combined with granular silicon products, it will further promote cost reduction and efficiency, and promote automation and intelligence in the photovoltaic industry.
Perovskite: A new track, new starting point, fully leading in efficiency and mass production progress. As a new battery technology, perovskite has the advantages of excellent photoelectric properties, low light performance, lower production costs, and can be stacked to achieve higher efficiency. It is the future development direction of battery technology. GCL Optoelectronics is a leading domestic perovskite company in terms of efficiency and mass production line construction. It has successfully achieved a conversion efficiency of 19.04% of the world's largest perovskite single-junction components and 26.36% conversion efficiency of 1.71 m2 perovskite laminated components.
Investment advice
We believe that the company has a forward-looking silane fluidized bed method. The quality of granular silicon has been continuously improved and recognized by downstream customers, production capacity has been released rapidly, and market share has increased rapidly. At the same time, advanced CCZ and perovskite are laid out to lay a solid foundation for long-term leading development. The company's revenue for 2024-2026 is estimated to be 27.817 billion yuan, 34.685 billion yuan and 42.336 billion yuan, respectively, -17%, +25%, and +22% year-on-year respectively. Net profit attributable to mother was RMB 2,663 billion, RMB 38.23 billion, and RMB 4.967 billion, respectively, +6%, +44%, and +30% year-on-year. The current stock price corresponds to PE 13, 9, and 7 times, respectively. First coverage, giving a “buy” rating.
Risk warning
Downstream demand falls short of expectations, market competition intensifies, perovskite research and development progress falls short of expectations, and customer concentration is high.