Incident: The company released its 2024 quarterly report. The company's 2024Q1 revenue was 2,953 billion yuan, an increase of 65.57%; net profit to mother was 76 million yuan, a decrease of 38.8%; net profit not attributable to mother was 84 million yuan, an increase of 37.25%. Among them, the impact of non-recurring profit and loss was about 8 million (daily increase loss of 29 million plus VAT deductions and government subsidy hedging); considering losses of 19 million yuan in silver powder and accrued bonuses of 20 million, the overall performance was basically in line with expectations.
The proportion of type N has increased significantly, and the introduction of LECO has helped to strengthen strength. 2024Q1 shipped about 550 tons of silver paste, with a slight decrease from month to month; of these, N-type silver paste accounted for about 60%, an increase of 20 pct over 2023Q4; of these, 230 tons of silver paste were shipped in March, accounting for 70%. Benefiting from the increased proportion of type N and LECO emissions, we estimate that the 2024Q1 processing fee (gross profit per kg) is about 443 yuan/kg, and the ring increase is 97 yuan/kg. Since March, the company's LECO silver paste has rapidly increased, with a market share of 40%. We expect processing costs of 800 yuan+/kg (200+ yuan premium compared to conventional TopCon), and maintain the premium as technology iterates. At the same time, the 2024Q1 silver powder, semiconductor paste and adhesive sector lost 19 million yuan, and Q1 calculated share payments and bonuses of about 20 million yuan. After the reversal, Q1 silver paste profit was estimated to be about 120 million yuan. The P type had almost no profit, and the N type contributed profit support. We expect the company to ship 800-900 tons of silver paste in Q2, and the annual shipment volume is expected to exceed 3,000 tons in 2024, with N-type accounting for 80% +; the company's LECO share will increase rapidly, supporting annual profit.
Overseas production expansion+gradual self-supply of silver powder glass powder to enhance integrated competitiveness. By the end of 2023, the company's production capacity reached 3,000 tons; at the same time, it completed Thailand's 600-ton silver paste project to strengthen its global layout.
The company is gradually localizing silver powder. Currently, silver powder shipments reach 20 tons+ in a single month. We expect the company to supply 300-500 tons of silver powder in 2024, and the additional 3000 tons of silver powder project in Changzhou is expected to be put into operation in 24Q4, supporting subsequent profits.
Operating cash outflows increased, and inventories declined from the beginning of the year. The company's 2024Q1 net operating cash outflow was 1,282 billion yuan, up 122% year on year; inventory was 1,111 billion yuan, down 16% from the beginning of the year. Subsequent inventory is expected to increase with shipments, and the inventory cycle will remain stable.
Profit forecast and investment rating: We maintain the 2024-2026 profit forecast. We expect the company's 2024-2026 net profit to be 7.4/8.8/1.02 billion yuan, an increase of 67% 20%/16%, corresponding PE of 12/10/9 times. Considering that the company's share of N-type silver paste continues to increase and the integrated layout is gradually being established, we have given 18xPE in 2024, with a target price of 80 yuan, maintaining a “buy” rating.
Risk warning: increased competition, policies falling short of expectations, etc.