Incident: On April 26, 2024, the company released its 2024 quarterly report. During the reporting period, the company achieved revenue of 3.644 billion yuan, up 135.38% year on year, up 3.95% month on month; realized net profit of 176 million yuan, up 103.71% year on month, up 89.01% month on month; realized deducted non-net profit of 194 million yuan, up 143.45% year on year and 102.39% month on month; 24Q1 gross margin/net margin was 10.65%/4.76%, respectively. /+2.17pct.
Enjoy LECO import bonuses, and silver paste shipments continue to lead. By the end of 24Q1, the downstream industry had achieved rapid and full introduction of LECO technology. As the LECO technology leader, the company fully enjoyed the dividends of LECO silver paste technology. Silver paste shipments continued to increase, leading the market share in the industry. 24Q1 shipped 569.94 tons of photovoltaic silver paste, with a year-on-year increase of 96.84%, of which 493.17 tons of conductive silver paste products for N-type batteries were shipped, accounting for 86.53%; it is expected that 2,500-3000 tons will be shipped throughout 2024. As the penetration rate of N-type batteries further increases, the proportion of the company's N-type silver paste shipments is expected to continue to rise. In terms of profitability, considering the industry's “silver point price+processing fee” silver paste pricing model, the current silver point price is growing rapidly, which may have led to a decline in the company's gross margin, but the company's LECO silver paste processing costs remain high, and overall profitability is strong.
Steady expansion of photovoltaic silver paste, collaborative development of semiconductor paste. The company announced a fixed increase plan in March 2024. The total capital to be raised will not exceed (inclusive) 264.55 million yuan to be used for R&D and production projects and supplementary working capital for R&D and production projects with an annual output of 2,000 tons of conductive silver paste and 50 tons of low-temperature conductive silver paste for semiconductor packaging. Against the backdrop of the complete transformation of N-type technology and the continuous rise in demand for photovoltaic silver paste, the company is actively expanding production to ensure superior production capacity and delivery. At the same time, the company is seizing semiconductor development opportunities to enhance the batch and large-scale supply capacity of products such as LED chip bonding silver paste, IC chip bonding silver paste, and power semiconductor sintering silver paste, and creating a second growth pole.
The silver nitrate project continues to advance, and the degree of integration deepens. By the end of 2023, the company's high-purity silver nitrate research and development projects are progressing in an orderly manner. It is expected that the silver nitrate project will be completed and put into operation by the end of 2024 to fully meet the company's raw silver powder production needs, open up upstream and downstream integration, achieve further cost reduction, and profitability is expected to increase.
Investment advice: The company is the world's leading supplier of conductive silver paste for photovoltaics, pioneering products such as N-type TopCon silver paste and HJT low-temperature silver paste, leading LECO technology. The company is expected to achieve operating income of 12.87 billion yuan, 16.06 billion yuan and 18.599 billion yuan respectively in 2024-2026, and net profit to mother of 629 million yuan, 757 million yuan, and 872 million yuan, an increase of 63.2%, 20.3% and 15.2% over the previous year. The corresponding EPS is 6.26, 7.53, and 8.68, respectively, and the PE multiples corresponding to the current stock price are 12.6X, 10.5X, and 9.1X, respectively. Maintain a “buy” rating.
Risk warning: PV installations fall short of expectations; risk of fluctuating raw material costs; risk of overseas exchange; increased industry competition.