Matters:

The company publishes its 2023 annual report and 2024 quarterly report. In 2023, the company achieved operating income of 8.733 billion yuan, a year-on-year increase of 45.43%; net profit to mother of 1,634 billion yuan, an increase of 56.04%; net profit after deduction of 1,525 billion yuan, an increase of 57.03% over the previous year; and EPS of 4.69 yuan. In the first quarter of 2024, the company achieved operating income of 2,579 million yuan, a year-on-year increase of 33.53%; net profit to mother of 578 million yuan, an increase of 71.93%; net profit after deduction of 551 million yuan, an increase of 85.54% over the previous year. The company's 2023 profit distribution plan: it is proposed to distribute a cash dividend of 12 yuan (tax included) to all shareholders for every 10 shares. Ping An's view:

The share of TopCon equipment revenue continues to rise, achieving a high increase in performance. In 2023, due to the rapid expansion of orders and continuous acceptance of delivery equipment, the company's annual revenue increased by 45.43% year on year; as TopCon equipment with high value and gross margin confirmed revenue one after another, net profit to mother increased by 56.04% for the whole year, of which Q4 increased 81.77% year on year. The share of 2024Q1 TopCon equipment in the company's revenue increased further. Revenue increased by 33.53% year on year, and net profit to mother increased by 71.93% year on year to reach 578 million yuan. In terms of profit margin, the company's revenue structure continued to be optimized, and profitability increased rapidly. Gross margin and net margin reached 28.95% and 18.77% respectively in 2023, up 3.51 and 1.34 percentage points respectively from 2022. Among them, gross margin increased quarterly. Due to the rapid increase in sales and management expenses in Q4, the net interest rate in Q4 declined. 2024Q1's profit margin continued to rise to a high level in recent years, achieving gross profit margin of 32.94% and net profit margin of 22.49%, up 3.99 and 3.72 percentage points from 2023, respectively. In 2024, the company's revenue structure is expected to be dominated by TopCon equipment, which is expected to support the company's performance.

TopCon orders have increased, and R&D and shipment of multiple routes such as HJT and perovskite have continued to advance. TopCon's production capacity exploded in 2023, the market penetration rate of N-type products increased rapidly, the company's core equipment PE-Poly had significant advantages such as cost reduction and efficiency, and equipment orders remained high. As the company's on-hand orders continued to expand, contract debt and inventory increased. By the end of 2023, the company's contract debt reached 18.111 billion yuan, up 211.6% year on year, and further increased to 18.203 billion yuan at the end of 2024Q1, and order advance payments continued to expand; in terms of inventory, the company's inventory reached 21.282 billion yuan at the end of 2023, up 201.1% year on year, of which issued products accounted for 87.42%, and 2024Q1 increased to 22.144 billion yuan at the end of the year, which is expected to contribute to performance after product acceptance. In 2024, there is still a certain amount of demand for additional TopCon production capacity around the world. Combined with the increase in demand for PERC upgrades to TopCon, the company is actively promoting the R&D and introduction of new technologies such as double-sided poly and edge passivation. The company's market share in the TopCon field and overseas business share is expected to increase further. On the HJT side, in 2023, the company won the bid for a complete mass production HJT line order from the world's leading photovoltaic companies, and obtained GW grade HJT equipment orders from European customers, including velvet making equipment, PVD equipment, and screen printing equipment; in April 2024, the company released news on its WeChat account, via T? V SÜD certified, Jiejia Weichuang's G12-132 heterojunction high-power module reached 745.7W, and the average battery conversion efficiency reached 25.6% (ISFH standard). Among them, PECVD uses RF double-sided microcrystal technology, and PVD uses double-sided VTTO. On the perovskite and perovskite lamination route, the company has the R&D and supply capacity of MW grade mass production line equipment for perovskite and perovskite lamination. It has provided perovskite equipment and services to more than 10 leading photovoltaic companies and industry start-ups and research institutes. In 2023, the company successfully launched its 5-in-1 cluster perovskite laminated vacuum coating equipment.

Continue to increase investment in R&D, boost the pan-semiconductor field, and lay out platform-based development. In 2023, the company invested 467 million yuan in R&D, an increase of 63.46% over the previous year. The R&D cost rate was 5.35%, and the 2024Q1 R&D cost rate increased to 5.79%. The company continued to promote R&D progress in photovoltaic cell equipment and semiconductor equipment, and made breakthroughs in the field of lithium battery vacuum special equipment. In the semiconductor field, the company has 4 to 12 inch wet wet-type and single-wafer etching and cleaning process equipment, and sales orders are constantly increasing; according to the company's WeChat account in April '24, the subsidiary Chuangwei Microelectronics won the bid for semiconductor silicon carbide wet-line wet process equipment and successfully signed the contract; in the field of lithium battery vacuum special equipment, the company's self-developed double-sided wound copper foil sputtering coating equipment successfully went offline, opening up a new situation for the company in the composite fluid vacuum equipment market.

Investment advice. Benefiting from the large-scale expansion of TopCon's production in 2023, the company's orders grew rapidly; taking into account the slowdown in TopCon production expansion, the increase in demand for PERC transformation, and the introduction of new technologies such as double-sided poly, the company's net profit for 2024-2026 is 30.49, 36.68, and 3.376 billion yuan (the original value of the 2024-2025 forecast is 30.86 billion yuan and 37.24 billion yuan), and EPS is 8.76, 10.54, and 9.70 yuan respectively. Dynamic PE is 8.0, 6.6, 7.2 times. The company focuses on promoting the introduction and application of new technologies such as TopCon double-sided poly and edge passivation. It continues to receive R&D breakthroughs and customer orders in HJT, perovskite and lamination technology, and is developing strongly in the field of semiconductors and lithium battery vacuum equipment, maintaining the company's “recommended” rating.

Risk warning. (1) Affected by electricity consumption and trade policies, etc., downstream installed equipment demand fell short of expectations; (2) TopCon battery production slowed in 2024, and the R&D and verification cycle for new technologies such as double-sided poly was long. If the company's order volume for TopCon, HJT, perovskite, pan-semiconductors, etc. is limited, it will put some pressure on future performance growth; (3) Due to the rapid decline in industrial chain prices, industry competition intensifies, and some photovoltaic cell projects are delayed or terminated, if the company's customers cancel orders or delay acceptance, or adversely affect the company's performance; (4) End New and old participants have increased research and development, and competition in the field of new photovoltaic battery equipment and semiconductor equipment has intensified.