Incidents:
On April 26, 2024, the company released its 2023 annual report. During the reporting period, the company achieved operating income of 35.327 billion yuan, a year-on-year increase of 20.22%, achieved net profit attributable to mother of 1,363 billion yuan, an increase of 45.81% over the previous year, realized net profit after deducting non-return to mother of 1,583 billion yuan, an increase of 55.77% over the previous year, and achieved a net cash flow of 1,643 billion yuan from operating activities.
Among them, 2023Q4 achieved operating income of 7.310 billion yuan, a year-on-year decrease of 12.59%/29.78%, respectively, and realized net profit to mother of 84 million yuan, a year-on-year decrease of 55.26%/79.93%, respectively. Competition in the 2023Q4 industry intensified, and component prices declined. In addition, the company's credit and asset impairment preparation and write-off accounts receivable totaled 761 million yuan in 2023, which had a significant impact on the company's performance.
The level of self-supply of cells increased, and the scale of component shipments increased steadily in 2023. In 2023, the company achieved a gross profit margin of 14.58%, with a year-on-year increase of 3.89pct. Among them, the battery module business achieved a gross profit margin of 13.63%, an increase of 8.62 pct year-on-year, and achieved a year-on-year increase of 18.99 GW, an increase of about 41% over the previous year. Overseas shipments of 8.84 GW increased, accounting for about 47%. During the reporting period, mass production capacity for HJT batteries and supporting components was implemented, and profitability improved markedly. Mature markets such as Europe and the US are highly accepting of HJT products. The company achieved a key breakthrough in the US market. During the reporting period, 1.44 GW of components were shipped to the US, with an average sales unit price of 2.88 yuan/W, which is far higher than the domestic average price level.
HJT's technical level continues to break through, and the production capacity layout is gradually improving
By the end of 2023, the company's module production capacity reached 35 GW, adding 10 GW during the reporting period, supporting the growth of shipments. The company's N-type technology has outstanding advantages. Its patented 0BB battery technology, 210 ultra-thin silicon wafer technology, pure silver usage is less than 7 mg/W, and stress-free battery interconnection technology are all mass-produced in the industry, and successfully developed double-sided microcrystalline technology to promote mass production of HJT. The maximum power of the company's HJT components can reach 741W, and the component conversion efficiency can reach 23.90%.
Profit Forecasts, Valuations, and Ratings
We expect the company's revenue for 2024-2026 to be 376.6/507.5/63.87 billion yuan, respectively, with year-on-year growth rates of 6.6%/34.7%/25.9%, net profit to mother of 17.5/24.8/3.04 billion yuan, year-on-year growth rates of 28.5%/41.5%/22.8%, EPS 1.54/2.17/2.67 yuan/share, respectively, and 3-year CAGR of 30.69%. Affected by increased competition in the industry and changes in the supply pattern, the company adjusted the pace of production capacity investment, which had an impact on the scale of shipments and unit profits. The company is a leading domestic HJT enterprise. It has a premium over mainstream technology and is expected to benefit from its successive expansion. Referring to comparable company valuations, we will give the company 12 times PE in 2024, with a target price of 18.45 yuan, maintaining a “buy” rating.
Risk warning: New production capacity falls short of expectations; industry competition intensifies; PV installations fall short of expectations.