Incident: The company released its 2023 annual report & first quarter report. In 23, it achieved revenue of 8.089 billion yuan, +94.99% year-on-year, net profit of 914 million yuan, +6.03% year-on-year, and net profit of 857 million yuan after deducting non-return to mother net profit of 857 million yuan, +7.51% year-on-year. Among them, Q4 achieved revenue of 2,982 billion yuan, +163.23% year over month, and net profit to mother of 200 million yuan, +14.46% year over month, and -30.70% month on month. The Q1 quarter of 2024 achieved revenue of 2,218 billion yuan, +91.80% year-on-year, and -25.61% month-on-month; realized net profit of 260 million yuan, +17.79% year-on-year, and +29.85% month-on-month. Revenue grew rapidly in '23 & 24Q1.
Profitability declined slightly, and contract liabilities continued to rise. The company's gross margin/net margin in '23 was 30.51%/10.81%, respectively, -7.80pct/-9.06pct year on year. The main reason is the high initial commissioning costs and investment costs of HJT equipment. It is expected that as the equipment matures, profitability is expected to pick up. As of the end of 24Q1, the company's contractual liabilities were 8.890 billion yuan, +66.64% year-on-year, with a high increase in on-hand orders.
HJT has achieved remarkable results in reducing costs and increasing efficiency, and mass production nodes are expected to arrive. HJT battery technology conforms to the rules of photovoltaic industry development with its advantages such as high conversion efficiency, low power decay, few process steps, and clear cost reduction routes, and is expected to become the mainstream route for the next generation of batteries. On October 12, 2023, Dali Huasheng's 2.5GW high-efficiency heterojunction project was officially put into operation. Huasheng New Energy announced that it had achieved the company's operating profit for the first time in September.
The HJT related industry chain proposed a “three reduction and one increase” all-round cost reduction and efficiency solution, which is expected to further reduce the cost difference. We expect that the cost inflection point may arrive at 24H2.
The HJT project has sufficient orders, and equipment leaders are expected to continue to benefit. The company continues to develop next-generation photovoltaic equipment, forwardly lay out HJT solar cell line equipment, and develop second-generation fence-less technology NBB and string welding equipment, which can reduce silver paste consumption by more than 30%, improving module power and reliability while further reducing manufacturing costs. In March and May 2023, the company signed a total of 8.4 GW equipment orders with Huasheng. We expect the annual HJT tender volume to reach more than 60 GW in 2024. Based on the company's market share of 70-80% of HJT equipment, the company's bid is expected to reach more than 40 GW in 24, which is about +30% over the previous year.
Investment advice: We expect the company to achieve net profit of 16.80/24.98/3.134 billion yuan in 24-26, corresponding to a PE of 19.7/13.2/10.5x in 24-26, maintaining a “buy” rating.
Risk warning: PV installation falls short of expectations; HJT industrialization falls short of expectations; uncertainty of equipment development