Core views

The core benefits are the expansion of the PV equipment sector's business scale, and the company's revenue achieved rapid growth in 2023; at the same time, the company received a large number of orders. By the end of 2023, the PV sector had active orders of 9.779 billion yuan (tax included), an increase of 79.63% over the previous year, providing support for short-term performance growth. 2024Q1's expense ratio declined significantly, and net profit to mother increased sharply by 143.82% year-on-year, driven by improved profitability, and the performance exceeded expectations. The company is a leader in photovoltaic module automation equipment, and is actively deploying in photovoltaic cell fields such as TopCon, HJT, and perovskite. In particular, it has firmly planned complete line equipment in the perovskite field. Currently, it has successfully obtained orders for multiple perovskite test lines and complete MW production capacity perovskite lines, and is expected to grow rapidly in line with industry trends in the future.

occurrences

The company released its 2023 annual report. It achieved annual revenue of 7.214 billion yuan, a year-on-year increase of 48.20%, and net profit of 337 million yuan, an increase of 11.45%; of these, the fourth quarter achieved operating income of 2,260 million yuan, an increase of 28.42% over the previous year, and net profit to mother of 38 million yuan, a year-on-year decrease of 62.23%.

At the same time, the company released its report for the first quarter of 2024. Q1 achieved revenue of 2,032 billion yuan, a year-on-year increase of 53.12%, and net profit to mother of 130 million yuan, an increase of 143.82% over the previous year.

Brief review

Losses and depreciation in the lithium battery sector affected annual statements. The profit recovery performance of the quarterly report exceeded expectations and revenue grew rapidly, and the photovoltaic equipment sector remained the core driver. There was some fluctuation in revenue growth between quarters due to differences in the pace of order confirmation. Overall, the company's revenue continued to grow rapidly in 2023. By sector, in 2023, the company's automated photovoltaic production line business achieved revenue of 5.502 billion yuan, an increase of 68.76% over the previous year, accounting for nearly 80% of revenue; in addition, automated packaging production lines, automated battery production lines, foundry products, and goods trade achieved revenue of 8.17, 2.72, 3.68, and 67 million yuan respectively, of +19.75%, -22.28%, +0.68%, and +51.23% year-on-year respectively.

Gross margin fluctuates slightly, and product upgrades and expansion are expected to increase profit margins. The company's comprehensive gross margin in 2023 was 20.98%, down 0.49pct year-on-year; among them, the gross margins of automated photovoltaic production lines and automated packaging production lines were 21.23% and 24.37%, respectively, -2.48 pcts and +1.49 pcts, respectively. The gross margin of component equipment fluctuates slightly due to the order structure, and the overall margin is relatively stable; looking forward to the future, the company will continue to improve the level of automation and intelligence of component equipment, and product upgrades are expected to achieve better profit margins. At the same time, the release of new products such as perovskite battery equipment and laminator equipment is also expected to increase the gross profit margin of the sector.

The PV sector has sufficient orders in hand, the packaging sector is growing steadily, and the performance of the lithium battery sector falls short of expectations. By the end of 2023, the company's PV sector had orders of 9.779 billion yuan (tax included), an increase of 79.63% over the end of 2022. Mainly due to strong demand from downstream PV module factories to expand production, the company maintained its leading position in the industry and obtained abundant orders. Demand in the packaging equipment industry was restored in 2023. At the same time, the new products launched by the company met market demand. The digital printing and smart factory business, which superimposed the company's layout, began to explode in the industry, so the overall operation of the packaging sector business improved. Sankyo Precision is a subsidiary of the company engaged in the lithium battery equipment business. In 2023, due to factors such as weakening industry demand, orders fell short of expectations, and lost 61 million yuan for the whole year. At the same time, goodwill impairment of 36 million yuan was calculated, which adversely affected the statements.

The 2024Q1 company's expense ratio dropped significantly, and overall performance exceeded expectations. 2024Q1 achieved operating income of 2,032 billion yuan, a year-on-year increase of 53.12%, net profit to mother of 130 million yuan, an increase of 143.82% over the previous year, and a net profit margin of 6.40%, an increase of 2.38 pcts over the previous year. The profit growth rate was significantly higher than the revenue growth rate. Mainly due to proper management of the company's expenses, the expense ratio dropped significantly by 2.63 pct to 11.42% during the period, leading to impressive performance on the profit side.

Adhering to the overall layout of perovskite equipment, the leading card position is expected to achieve rapid growth. The company is a leading company in the field of perovskite equipment. It is committed to providing overall solutions for perovskite single and laminated equipment. The company is an enterprise that completed the development of perovskite equipment earlier in the industry and has actual product sales. Since the beginning of 2023, orders for the company's complete line of perovskite battery equipment solution projects have increased significantly. At present, the company has a mature supply capacity for the entire perovskite pilot line, and has successfully obtained orders for multiple perovskite test lines and MW production capacity perovskite lines, and cooperated with many customers to carry out process verification and production line construction. In addition, in terms of core large-scale, mass-produced process equipment, the company has rich technical reserves, covering various technical routes such as PVD, ALD, and evaporation. We believe that the development direction of the perovskite/laminated battery industry is becoming more clear. The company may take the lead in laying out the perovskite equipment field, and may gain a first-mover advantage, accumulate more experience in process technology, and is expected to achieve rapid growth in line with industry trends.

Investment advice: The company is a leader in automated equipment for photovoltaic modules, and is actively deploying in photovoltaic cell fields such as TopCon, HJT, and perovskite. In particular, the entire line equipment plan is firm in the perovskite field, and future growth can be expected. We expect the company's revenue for 2024-2026 to be 88.04, 10.2.49, and 11.631 billion yuan, respectively, up 22.0%, 16.4%, and 13.5% year-on-year; net profit to mother will be 5.38, 7.01, and 880 million yuan, respectively, up 59.8%, 30.4%, and 25.5% year-on-year respectively. Corresponding PE will be 16.7, 12.8, and 10.2 times, respectively, maintaining the “buy” rating.

Risk warning:

① The risk that production expansion in the downstream module industry falls short of expectations: Photovoltaic equipment is one of the company's core businesses. The company occupies a leading position in the module assembly line field. Product demand mainly comes from the expansion of the downstream module industry. If the downstream boom declines and the expansion of the module industry falls short of expectations, it will have a certain adverse effect on the company's performance growth.

② Risk that the development of new businesses such as cell equipment falls short of expectations: PV cell equipment is the company's key business. The company has a layout on battery technology routes such as TopCon, HJT, and perovskite. New business development is not only limited by changes in external factors, but also places higher demands on internal R&D and management capabilities. If there are major changes in external factors or insufficient company technology development and comprehensive operation capabilities, it will face the risk of falling short of expectations.