Key points of investment
Outstanding cost control advantages, and profitability improved month-on-month
In 2023, the company achieved operating income of 22.589 billion yuan, a year-on-year increase of 19.66%, a year-on-year increase of 17.21%, a year-on-year increase of 17.21%, a gross profit margin of 14.64%, a year-on-year decrease of 0.98 pct, a net profit margin of 8.19%, and a year-on-year decrease of 0.18 pct. In the fourth quarter of 2023, the company achieved operating income of 5.939 billion yuan, a year-on-year increase of 11.40%, a year-on-month decrease of 1.57%, and achieved net profit of 419 million yuan, a year-on-year increase of 827.92%, a year-on-month decrease of 23.26%, a gross profit margin of 16.25%, an increase of 3.15 pct, a net profit margin of 7.03% and a decrease of 2.02 pct month-on-month, benefiting from the company's excellent cost management level and product advantages. The company's gross margin improved in the fourth quarter of 2023.
The adhesive film business contributed the main source of revenue. Various business scales grew steadily in 2023, and the company's various businesses developed steadily: 1) Film: In 2023, the company achieved film sales volume of 2,249 billion square meters, up 70.22% year on year, achieving operating income of 20.481 billion yuan, an increase of 21.53% year on year, the most important revenue source; 2) Backboard: In 2023, the company achieved backboard sales of 151 million square meters, an increase of 22.70% over the previous year, achieved operating revenue of 1,327 billion yuan, a year-on-year decrease of 1.08%. The volume ranking jumped to second place in the world; 3) Photosensitive dry film: In 2023, the company sold 115 million square meters of photosensitive dry film, up 4.52% year on year, achieving revenue of 454 million yuan, down 2.51% year on year.
Focus on capacity expansion, technology research and development to create value for customers, strengthen information management and embrace new intelligent opportunities. In 2024, the company's main work focuses on: 1) Capacity expansion: The company will simultaneously implement multiple production expansion projects related to photovoltaic materials and electronic materials. Among them, photovoltaic materials include: photovoltaic film and photovoltaic backpanels at the Vietnam base, photovoltaic film at the Suzhou base, and the production capacity expansion of photovoltaic film at the Jiangmen base; electronic materials include: photosensitive dry film and FCCL at Lin'an headquarters, and photovoltaic film at Jiangmen base; electronic materials include: photosensitive dry film and FCCL at Lin'an headquarters Expansion of dry film production capacity; 2) Technology research and development: the industry is currently in In the stage of rapid technological change, the company will create the most cost-effective packaging solutions for customers through different types of photovoltaic film (POE, EPE/EP, white/ordinary EVA, integrated film, connecting film) and photovoltaic backpanel combinations; 3) Information management: The company has set up a professional digital team, developed its own ERP, MES, WMS, EAM systems covering the main products of the company and its subsidiaries, and purchased OA, SRM, TMS and other software to actively embrace and respond to the changes and opportunities brought about by the informatization and intelligent society.
Profit forecasting and valuation
The profit forecast was lowered and the “buy” rating was maintained. The company is a leading global photovoltaic film enterprise. It has outstanding comprehensive competitive advantages, continuous breakthroughs in product development, and the orderly release of new production capacity. Considering that upstream particle prices fluctuate significantly, downstream component prices remain low, and the profitability of the film chain is under short-term pressure, we lowered our profit forecast for 2024-2025 and added a profit forecast for 2026. We expect to achieve net profit of 26.71 billion yuan, 30.54, and 3.667 billion yuan (30.03 billion yuan and 4,033 billion yuan respectively before the reduction in 2024-2025). The corresponding EPS is 1.43, 1.64, and 1.97 yuan, respectively. The corresponding PE is 17, 15, and 12 times, respectively.
Risk warning: PV installed demand falls short of expectations, fluctuating raw material prices, worsening competition due to capacity expansion, and fluctuating international trade policies.