Key points of investment
Revenue and profit doubled in 2023, and R&D efforts were strengthened. Revenue in 2023 was $3.443 billion (+140% YoY, same below), with net profit attributable to mother of $217 million (+123%), of which equity incentive expenses were $78 million, and net profit to mother after adding back equity incentive expenses was $295 million (+156%). In 2023, the gross sales margin was 25.55% (-2.64pct), the net sales margin was 6.25% (-0.59pct), R&D investment of 154 million yuan (+195%), and the R&D investment cost ratio was 4.48% (+0.83pct). The company continued to introduce high-end talents. By the end of 2023, there were 400 R&D personnel, accounting for 19% of the total number of employees. In 2023, 1) By industry: Pan-semiconductor industry revenue of 3.198 billion yuan (+162%), gross profit margin 36.00% (+4.89pct), sales volume of 120 units (+22%), single unit price 26.65 million yuan (+114%); other industries revenue of 245 million yuan (+16%). 2) By product: Revenue from process pollution prevention and control equipment was 3.250 billion yuan (+152%), gross profit margin 26.33% (-2.89pct); revenue from terminal pollution control equipment was 149 million yuan (+35%), and other revenue was 44 million yuan (+28%).
2024Q1 performance continued to double and increase, and impairment accruals for receivables increased. 2024Q1 has revenue of 860 million yuan (+50%), net profit to mother of 79 million yuan (+122%), gross sales margin of 28.28% (+2.48pct), and net profit margin of 9.18% (+3.14pct). 2024Q1 accrued credit impairment losses of $32 million, which was recovered by $11 million in the same period last year.
Net operating cash flow improved in 2023. In 2023, the company 1) net operating cash flow was -130 million yuan, with a net outflow of -82% year-on-year, mainly due to a sharp increase in repayments for products sold and optimization of payment methods. 2) Net investment cash flow - $563 million, net outflow +463%; 3) Net financing cash flow of $829 million, net inflow increased by 29%. 2024Q1's net operating cash flow was -393 million yuan, -268% year-on-year.
The balance ratio has risen, and asset turnover has accelerated. In 2023, the company's balance ratio was 75.70%, +5.81 pct year on year; the net operating cycle decreased by 164.63 days to 238.88 days year on year. As of 2024Q1, the balance ratio was 76.55%, +10.46pct year-on-year.
Leading photovoltaic process pollution prevention and control equipment, integrated layout of photovoltaic cell silicon wafers and new growth in carbon sequestration.
1) Abundant orders for environmental protection equipment: Since 2023, the company has announced a total winning bid of more than 12 billion yuan (including consortia). The integrated model & industrial chain extension capacity verification have rapidly increased the value of a single GW. 2) Integrated layout of battery+silicon wafer: Plan a 24GW TopCon battery per year in Ningguo, Anhui, and a 20GW silicon wafer+20GW battery project in Ziyang, Sichuan. Among them, Ningguo's first phase of 18 GW has already been put into production, the first film went offline on December 28, 2023, and the first phase of Ziyang's 10GW silicon wafer+10GW battery was laid to begin construction at the end of March 2024. The integration of silicon wafers and cells enhances competitiveness, and the collaboration of the original equipment business brings customer+cost advantages. 3) Demand for carbon sequestration is expected to accelerate: With the advantages of catalytic technology accumulated in collaboration with the main business, carbon sequestration projects can capture flue gas CO2, dispose of steel slag, and make resource-based construction materials at low cost, a win-win situation for all parties. By the end of 2023, 2 lines have been completed and put into operation. As the carbon market expands, demand for carbon sequestration in cement steel will be released at an accelerated pace.
Profit forecast and investment rating: The company's abundant orders for supporting equipment guarantee the performance base. The commissioning of battery projects contributes to an increase, and demand for carbon sequestration is expected to accelerate. Considering the intensification of competition and the reduction in earnings per watt of cells, we lowered our 2024-2025 net profit forecast from 904/1,251 million yuan to 676/962 million yuan. The estimated net profit to mother is 1,151 million yuan in 2026, corresponding to 10/7/6 times PE, maintaining a “buy” rating.
Risk warning: Equipment orders fall short of expectations, increased industry competition, receivables risk, etc.