The leading position in photovoltaic silicon wafers is stable and maintains a “buy” rating
According to the company's annual report for '23 and quarterly reports for '24, the company's net profit for '23 was 3.416 billion yuan, a decrease of 49.9%. The net profit decline was large due to a sharp drop in silicon wafer prices and large asset impairment losses. The net profit for 24Q1 was negative to 800 million yuan, which turned negative into a sharp reduction in the price of silicon wafers. Considering the sharp decline in silicon wafer prices, we lowered the company's 24-26 silicon wafer price and gross margin assumptions. We lowered the company's 24/25/26 EPS to 0.72/0.81/0.93 yuan (previous value: 2.73/3.02/-yuan). Referring to Wind's unanimous expectations, it is 6.54 times PE in 24 years. Considering the company's stable position as a silicon wafer leader, it has strong scale advantages and cost advantages, and showed strong operational resilience during the downturn of the industry, giving the company 15 times PE in 24 years, corresponding to the target price 10.8 yuan (previous value: 24.12 yuan), maintaining the buy rating.
Silicon wafer production and sales lead the world, and silicon wafer price reduction drags down profits
In terms of shipping, according to the company's annual report, the company shipped 114 GW of silicon wafers in 2023, an increase of 68% over the previous year, achieving a rapid increase in shipment volume, with a global market share of 23.4%, maintaining a leading position in the world. In terms of production capacity, by the end of 23, the company's monocrystalline silicon wafer production capacity reached 183 GW, leading the industry in production capacity scale.
In terms of price, according to the company's annual report, due to the continued expansion of the imbalance between supply and demand, the mainstream price of photovoltaic modules fell from 1.8-1.85 yuan/W at the beginning of 2023 to 0.9-0.95 yuan/W at the end of the year, a drop of nearly 50%, seriously squeezing the profits of all links in the industry chain. The price of silicon wafers also dropped significantly, causing the company's 24Q1 profit to turn negative.
Based on intelligent manufacturing, “N-type large size+tiled 4.0” injects long-distance running advantages. The company continues to promote the deep integration of the technology platform represented by G12 with the Industry 4.0 production line. According to the company's annual report, the company already had 8 “green factories” at the end of '23, and Ningxia Zhonghuan was awarded the “National Intelligent Manufacturing Demonstration Factory” by the Ministry of Industry and Information Technology. In terms of independent innovation, the company focused on the transformation trend of N-type and large-size technology. In 23, it achieved 75GW shipments of N-type and large-size (210 series) products, increasing the proportion to 66%, which is the highest in the industry, and N-type products achieved a single monthly production leading industry advantage of about 11.6%. 23Q4 completed the development of tile 4.0 products and promoted mass production. Along with the iteration of efficient tile stacking products and the upgrading of manufacturing methods, the company's production capacity for efficient tile stacking components reached 18 GW at the end of '23.
The battery module business is progressing steadily, and the global layout is opening up a new growth pole. The company independently develops precious metallization processes, significantly reducing non-silicon costs. The TopCon platform is expected to be upgraded to TBC to further improve conversion efficiency. The Guangzhou 25GW solar cell industry 4.0 factory adheres to the “stacking+G12” dual-platform differentiation route, giving full play to the advantages of industrial chain collaboration. According to the company's 23 annual report, the company shipped 8.6 GW of components in '23, achieving a year-on-year increase of 29.8%. In terms of globalization, in October 2023, the company and Vision Industries signed a “Joint Development Agreement” at the “Belt and Road” International Cooperation Summit Forum to promote the commencement of the first 20GW phase of the Saudi crystal chip co-construction project and take the lead in building a local Saudi photovoltaic industry chain, which is expected to open up new growth space.
Risk warning: Silicon wafer price fluctuations exceed expectations; downstream demand falls short of expectations, etc.