The company's performance is growing rapidly. The company released the 2023 annual report and the 2024 quarterly report. In 2023, the company achieved operating income of 2.76 billion yuan, a year-on-year increase of 37.4%, and realized net profit of 150 million yuan, a year-on-year increase of 140 million yuan, an increase of 47.5% over the previous year. In terms of breakdown, the company achieved operating income of 7.2 billion yuan in the fourth quarter of 2023, an increase of 25.8% over the previous year, realized net profit of 34 million yuan, an increase of 35.5% over the previous year, and realized net profit without return to mother of 0.27 million yuan, a year-on-year increase of 0.27 million yuan 19.7%; In the first quarter of 2024, the company achieved operating income of 70 million yuan, an increase of 26.2% over the previous year, realized net profit of 35 million yuan, a decrease of 4.2% over the previous year, and realized net profit without deduction of 29 million yuan, a decrease of 15.3% over the previous year.
Product sales increased dramatically, and costs during the period were greatly improved. In 2023, the company shipped 33,000 tons of welding belts, an increase of 47.8% over the previous year, and a significant increase in shipments. Among them, in 23Q4 and 24Q1, we expect to ship 8,500-9,000 tons, and the net profit per ton is estimated at about 4,000 yuan. Affected by the increase in the price of raw copper, the company's gross margin declined. 23Q4 and 24Q1 were 7.25% and 7.85%, down 5.9 pcts month-on-month and 0.6 pcts, respectively; however, the cost ratio improved markedly during the company period. 23Q4 and 24Q1 were 3.0% and 3.9%, respectively, down 2.5 pcts and increased 0.9 pcts month-on-month, respectively, and maintained 3%-4% overall.
Grasp future technology trends and look forward to subsequent product structure improvements. TopCon battery technology is rapidly replacing PERC battery technology and becoming mainstream in the market. As an important auxiliary material, photovoltaic welding tape can help reduce battery costs and increase efficiency. Currently, photovoltaic welding belts are gradually being switched from MBB to SMBB products. Considering that thinning the welding belt can reduce the blocking of light by the welding belt and improve cell conversion efficiency, it is expected that 0BB products will also be quickly introduced into TopCon technology. Changes in the product structure are expected to improve the profitability of the company's units, and the company is expected to lead the development of the industry as a leading company in photovoltaic welding belts.
Profit forecast, valuation and investment rating: Taking into account the decline in processing fees in 23Q4 and 24Q1, we lowered the company's 2024/2025 revenue to $38.7/4.69 billion (previous value was $39.1/4 billion), which is expected to achieve operating income of $5.50 billion in 2026; net profit to mother for 2024/2025 is 2.3/3, respectively.
At 100 million yuan (previous value: 23/360 million yuan), the diluted EPS is expected to achieve a net profit of 360 million yuan in 2026, and the diluted EPS is 2.2/2.9/3.5 respectively based on the current total share capital. The company's current stock price is predicted to be 17/13/11 times PE for 2024/2025/2026, respectively. Considering that the company is a leading domestic welding belt, it will lead the development of new SMBB welding belts and 0BB welding belts required for N-type battery technology in the future, maintaining the “gain” rating.
Risk warning: Risk of PV demand falling short of expectations; risk of fluctuating raw material prices; risk of falling product prices; production capacity investment falling short of expectations; risk of not updating the information data used in the research report in a timely manner.