Incidents:
The company released its 2023 annual report: achieving total operating income of 118.682 billion yuan, a year-on-year increase of 43.55%; net profit attributable to shareholders of listed companies of 7.404 billion yuan, an increase of 153.20%; net cash flow from operating activities of 24.816 billion yuan, an increase of 507.62%; and a weighted average return on net assets of 24.19%, an increase of 12.15 percentage points year-on-year.
Comment:
Annual results reached record highs, and fourth-quarter profits were under pressure. In 2023, the company achieved a significant increase in annual revenue and net profit, mainly due to strong market demand in the photovoltaic industry, a significant increase in the company's PV module product shipments, an increase in the share of N-type products, and a reduction in the period cost ratio due to economies of scale. The company's annual PV module shipment volume was 78.52 GW, an increase of 77.11% over the previous year. The average sales price of photovoltaic modules was 1.46 yuan/watt, a year-on-year decrease of 0.34 yuan/watt, and the gross profit per watt was 0.21 yuan, an increase of 2 points over the previous year. It is worth mentioning that the company shipped 48.41 GW of N-type PV modules, accounting for 61.65%. N-type components have a clear premium over P-type products, which in turn boosts the company's profitability. In the fourth quarter of 2023, the company achieved total revenue of 33.585 billion yuan, up 12.31% year on year, up 6.71% month on month; net profit attributable to shareholders of listed companies was 1,086 billion yuan, down 13.97% year on year and 56.75% month on month. Competition in the photovoltaic industry was intense in the fourth quarter, product prices fluctuated sharply, and the profitability of photovoltaic modules declined.
The company maintains its leading position in the TopCon battery field, and the integrated production capacity continues to grow.
The company continues to improve the integrated production capacity layout, and the production capacity and compatibility of silicon wafers, batteries and photovoltaic modules are continuously improving. By the end of 2023, the company's production capacity for silicon wafers, batteries and photovoltaic modules reached 85GW, 90GW and 110W respectively, with an integrated production capacity support rate of over 85%. In 2024, the company will maintain a cautious pace of expansion, giving priority to the implementation of the superior production capacity of the large base in Shanxi.
The first phase of the 14GW production capacity project at the company's Shanxi base was put into operation in March 2024, and production is expected to be completed in mid-year. Meanwhile, the second phase of the project will be put into operation in July to further enhance the company's integrated production capacity. It is expected that by the end of 2024, the company's advanced production capacity scale for silicon wafers, batteries, and components will reach 120GW, 110GW and 130GW respectively, and the N-type production capacity will exceed 100GW, continuing to consolidate its leading position in the industry. In 2024, according to SMM forecasts, the market share of N-type products will exceed 70%, and TopCon battery technology will become the mainstream technology in the market. The price of Topcon PV modules has a premium of about six points compared to PERC modules. Despite abundant supply in the photovoltaic module industry and a trend of convergence in the premium level of TopCon products, TopCon products still have a comparative advantage as superior production capacity.
The company's TopCon battery conversion efficiency continues to improve, reserve new technology and new processes, and maintain technological leadership. At the end of 2023, the average mass production efficiency of the company's N-type batteries exceeded 25.8%, and the average mass production efficiency in the first quarter of 2024 exceeded 26%. The conversion efficiency of perovskite laminated batteries based on TopCon was 32.33%, and the technical advantages were obvious. On the basis of existing large-size ultra-thin monocrystalline silicon wafers, high-efficiency N-type TopCon battery technology, and high-efficiency N-type double-sided module technology, the company reserves technologies such as IBC battery technology, perovskite battery technology, and component recycling, and is steadily advancing the development and introduction of other new technologies in an orderly and steady manner. This helps the company grasp changes in industry technology routes and maintain long-term competitiveness.
Supply in the photovoltaic industry will remain abundant in 2024, and the industry will accelerate survival of the fittest. According to data disclosed by the China Photovoltaic Industry Association, in 2023, China and the global PV installed capacity reached 216.88 GW and 390 GW respectively, with year-on-year increases of 145.12% and 69.57% respectively. In 2024, demand for clean energy is expected to remain high in emerging regions such as the Middle East and Africa, while demand in China and Europe is expected to be stable, and global PV installed capacity is expected to grow steadily. However, on the supply side, despite the withdrawal of PERC production capacity and a rapid increase in the market share of N-type products, the industry has large production capacity and is gradually building its own production capacity overseas. At the same time, it faces the risk of changes in trade policies. Overcapacity at all stages is still a problem for the industry. Currently, profits in all aspects of photovoltaic manufacturing are under pressure, which will accelerate the clearance of backward production capacity, while leading companies have capital advantages, scale advantages, technical advantages and cost advantages, and are more resilient to risks.
Maintain the company's “gain” rating. Net profit attributable to shareholders of listed companies in 2024, 2025, and 2026 is estimated at 5.351 billion yuan, 6.362 billion yuan, and 7.293 billion yuan, corresponding to earnings of 0.53, 0.64, and 0.73 yuan per share. Based on the closing price of 7.50 yuan/share on April 23, 2024, the corresponding PE is 14.02, 11.79, and 10.29 times. Short-term overcapacity in the photovoltaic industry has had a negative impact on the industry, and profit margins in various manufacturing processes have been compressed. As a leading company in the TopCon battery field, the company has leading technology advantages, global layout advantages, brand advantages and strong capital strength, and actively lays out businesses such as energy storage, photovoltaic building integration, and module recycling. The company's valuation is at a low level, maintaining the company's “gain” investment rating.
Risk warning: PV industry chain capacity is expanding too fast, risk of phased oversupply; risk of global PV installed demand falling short of expectations; risk of changes in international trade policies and trade friction.