Core views

The company's two core businesses, photovoltaic brackets and connectors, are showing a positive trend. The company's PV bracket business is mainly aimed at overseas customers, covering the world's leading PV tracking bracket manufacturers such as Next Tracker, GCS, and FTC. The company's PV bracket business grew rapidly in the first quarter. In the future, with the gradual normalization of production at the company's US factory, the PV business expectations will continue to be optimistic. The connector business is expected to benefit from increased demand for high-end digital communication products brought about by AI.

In January of this year, the company completed the granting of equity incentives to motivate employees. Recently, the company has completed a fixed increase, which will further support business development.

occurrences

The company publishes its 2023 annual report and 2024 quarterly report. In 2023, the company achieved revenue of 5,059 billion yuan, a year-on-year increase of 0.96%, and net profit to mother of 122 million yuan, a year-on-year decrease of 49.04%. In the first quarter of 2024, the company achieved revenue of 1,529 billion yuan, a year-on-year increase of 63.18%, and net profit to mother of 86.68 million yuan, an increase of 456.11% over the previous year.

Brief review

1. The 2023 performance was under pressure, and the first quarter of 2024 showed a high increase in performance.

In 2023, the company achieved revenue of 5,059 billion yuan, a year-on-year increase of 0.96%, and net profit to mother of 122 million yuan, a year-on-year decrease of 49.04%.

In terms of revenue segmentation, the company's connector business revenue in 2023 was 1,784 billion yuan, down 8.53% year on year, and PV bracket business revenue was 3.137 billion yuan, up 7.68% year on year.

In 2023, the company's comprehensive gross profit margin was 17.60%, up 0.12 pct year on year. Among them, the gross profit margin of the connector business was 30.14%, up 5.06 pct year on year.

Profits declined significantly, and the main revenue growth rate was under pressure, and the company's divestment of Hunan Yihua shares in 2022 confirmed investment income of 73.724,200 yuan.

In the first quarter of 2024, the company achieved revenue of 1,529 billion yuan, a year-on-year increase of 63.18%, and net profit to mother of 86.68 million yuan, an increase of 456.11% over the previous year. The company's revenue grew rapidly in the first quarter, mainly driven by the rapid growth of the photovoltaic stent business.

2. The construction of a factory in the United States lays out overseas production capacity, and a fixed increase supports the development of the photovoltaic bracket business.

The company's PV bracket business is mainly aimed at overseas customers, covering the world's leading PV tracking bracket manufacturers such as Next Tracker and GCS. In September 2022 and February 2023, the company's subsidiary Taihua New Energy (Thailand) established three subsidiaries “CZT ENERGYINC”, “NEXTRISE INC”, and “Alpha Steel LLC” in the US, holding 75%, 75%, and 51% of the shares respectively. Establishing a subsidiary in the US helps the company further enhance its overall competitiveness. According to the US Energy Information Administration (EIA) forecast (April 2024), the US will add 19.2 GW of PV installed capacity in 2023, and is expected to add 36.5GW in 2024, an increase of 90% over the previous year. With the release of production capacity in US factories and the increase in operating capacity, the company's photovoltaic bracket business is expected to achieve good growth.

On April 2, 2024, the company announced that the fixed increase in capital raising had been completed, with a total capital raised of 533 million yuan. After deducting sponsorship and underwriting expenses and other issuance expenses directly related to the issuance of equity securities, the net amount raised was 521 million yuan. The projects raised this time are the Yueqing PV bracket core component production base construction project, the PV bracket full-scene application R&D and experimental base construction project, and supplementary working capital. The completion of the fixed increase will help further enrich and enhance the company's product line and service capabilities, enhance the company's competitiveness, and further support business development.

3. The connector business is expected to benefit from increased demand for high-end digital communication products, etc.

The company is a leading domestic supplier of communication connectors. The external IO ports SFP and RJ45 can be used in servers, switches and other devices. The development of AI will drive demand for products such as high-end switches and servers, and the company's communication connector business is expected to benefit from it.

4. Investment advice.

With the release of production capacity at the US production base and the improvement of operating capacity, and the further improvement of the company's photovoltaic business layout, the future development of the company's photovoltaic bracket business is optimistic. The connector business is expected to benefit from increased demand for high-end switches and the like brought about by AI. In January 2024, the company completed the award of an equity incentive plan, which will effectively motivate employees and enhance confidence in future development. We expect the company's revenue from 2024 to 2026 to be 7.183 billion yuan, 8.727 billion yuan, and 10.014 billion yuan, respectively, and net profit to mother will be 363 million yuan, 492 million yuan, and 590 million yuan respectively. The corresponding PE is 20x, 15x, and 12x, respectively, maintaining a “buy” rating.

5. Risk warning: Global PV installation and pace fall short of expectations, affecting the company's downstream customer PV tracking bracket demand; changes in the external environment affect the normal operation of the company's US factory; the implementation of US new energy subsidies falls short of expectations and affects the company's downstream customer demand, company product prices, etc.; US factory operating costs exceed expectations; changes in raw material prices and exchange rate changes affect beyond expectations; the impact of increased competition in the PV stent business, declining company share and profitability; the downstream consumer electronics and communications industry demand for the connector business falls, etc. The company connects to business development; financial pressure is high, which affects business development; there are many individual shareholders, risk of reducing holdings, etc.