Incident: On April 18, 2024, Yubang New Materials released its 2023 annual report and 2024 quarterly report. In 2023, the company achieved operating income of 2,762 billion yuan, up 37.4% year on year; net profit to mother was 151 million yuan, up 50.7% year on year, gross profit margin was 11.22%, the same year on year; 23Q4 achieved revenue of 716 million yuan, up 25.8% year on year, net profit of 34 million yuan, up 35.5% year on year; in the first quarter of 2024, the company achieved revenue of 700 million yuan, an increase of 26.2% year on year. YoY -4.18%, gross profit margin 7.85%, YoY -5.2pct, month-on-month +0.6pct.

The high PV installation boom led to a high increase in shipments, and rising costs disrupted profits: In 2023, it benefited from a rapid decline in PV module prices, and demand for PV installations exceeded expectations. According to the National Energy Administration, China added 216.88 GW of new PV installations in 23, a sharp increase of 148% over the previous year, driving the company's high sales volume of welding belts. In '23, the company sold 33,300 tons of welding tape, an increase of 48% over the previous year. The leading position continued to be consolidated. At the same time, the profitability of the 23Q4 company may be affected by the increase in the cost of main raw materials, the fact that most of the 23Q4 company's R&D expenses are included in production costs, and the issuance of convertible bonds generates more interest expenses, etc., and gross margin and profit declined significantly from month to month. Entering '24, the price of raw materials copper and tin increased significantly, and 24Q1 gross margin was greatly affected, falling 5.2 pcts year over year.

The share of SMBB continues to rise, and 0BB industrialization is successfully introduced: the company's SMBB share continues to rise. It is estimated that 23Q4 is expected to rise to about 55%, and is expected to rise to about 70% in 24, which is expected to drive the company's profits to continue to increase; 0BB industrialization has progressed smoothly over the past 24 years, and the TopCon0BB string welding machine has reached the requirements for mass production and release. According to Autoway, the energy consumption of a single chip is expected to drop by more than 10%, and the module power is increased by more than 5W. At the same time, the rise in silver prices is also further catalyzing the industrialization of 0BB. As 0BB continues to be introduced downstream, it will further enhance the company's profit margin.

Profit forecast and valuation: Considering the continuous rise in the price of copper and tin raw materials in 24, it is estimated that the company will ship 4.34/5.45/68,500 tons of photovoltaic welding belts in 24-26, with net profit of 2.19/311/404 million yuan respectively (original value of 277/372 million yuan in 24-25). The current stock price corresponds to 16.6/11.7/9.0 times PE in 24-26. As a leading photovoltaic welding belt company, the company will accompany the industry opportunities brought about by changes in PV N-type cell technology The volume of welding belts continues to be released, consolidating the leading position of photovoltaic welding belts, maintaining 22 times PE in 2024, corresponding to a target price of 46.27 yuan/share, and maintaining a “buy” rating.

Risk warning: Global PV demand growth falls short of expectations, new technology implementation falls short of expectations, new product release falls short of expectations, raw material prices fluctuate sharply, and capacity construction falls short of expectations.