Key points of investment:

Incident: The company released its quarterly report for the year 24. In 24Q1, the company achieved operating income of 3,714 billion yuan, a year-on-year decrease of 6.38%, and realized net profit of 0.2 billion yuan, a year-on-year decrease of 94.42%. The performance was in line with expectations.

Q1 The decline in performance was mainly due to falling prices in the industrial chain and a decline in the profitability of the company's products. According to the company announcement, 24Q1 delivered 10.08 GW of battery products, including 1.52 GW for P type and 8.56 GW for type N, and battery shipments increased by 109.56% year on year. However, due to the continuous expansion of the scale of all links in the industrial chain, supply-side competition intensified, and profits in all links in the industrial chain declined, and the profitability of the company's cell unit was affected. In the first quarter, the company's P-type batteries lost money, and N-type batteries were marginally profitable.

The market share of the N-type increased, and the company maintained the lead in N-type production capacity. In Q1, P-type production capacity was phased out at an accelerated pace, and the market share of N-type products increased to about 70%. The company actively adapts to changes in market trends. At the end of 2023, the company completed asset impairment calculation related to P-type PERC batteries. Currently, the company's product structure is 40GW N-type products, and it is the first in the industry to complete the upgrade of P-type to N-type products.

Actively promote R&D cost reduction, and TopCon products are continuously upgraded. In '23, the company successfully introduced the LP double insertion process, introduced a number of cutting-edge technologies for the “MonO” series products, and mass production conversion efficiency reached 26% at the end of '23. In 24 years, Q1 continued to promote the upgrading of photovoltaic technology, actively explore technologies such as 0BB and improved passivation performance, and continued to reduce costs and improve efficiency. Furthermore, in terms of technology reserves, the company continues to carry out pilot research on BC batteries, actively promote mass production of BC batteries, and maintain the company's core competitive advantage in the photovoltaic cell industry.

Plan and lay out overseas production capacity to improve battery profitability. The company targets overseas markets and continues to explore emerging markets such as Europe, Australia, North America and Latin America on the basis of the original international markets such as India and Turkey. At the same time, at the same time, the company is actively carrying out overseas market research, promoting the selection and implementation of overseas high-efficiency battery projects, and further strengthening the supply capacity of photovoltaic cells in overseas markets. The company continues to promote preparations for the issuance of H shares, laying the foundation for global development.

Maintain profit forecasts and maintain the company's “gain” rating. The company is a leading N-type battery company, leading the production capacity and technology industry. The market share of N-type continues to increase in 24 years. We expect the company's net profit for 24-26 to be 10.61, 14.09, and 1,788 billion yuan. The current stock price corresponds to PE in 24, 11 times, maintaining the company's “increase” rating.

Risk warning: Global demand for PV installations falls short of expectations; industrial competition intensifies; progress in the industrialization of new technologies falls short of expectations.