Incidents:
The company released its 2023 annual report. In 2023, Juhe achieved operating income of 10.29 billion yuan, +58.21%; in 2023, the company achieved net profit of 442 million yuan, +13% year over year, which is basically in line with our previous expectations.
Silver paste shipments maintained high growth in 2023, and profits declined slightly. (1) The company's photovoltaic conductive silver paste business achieved operating income of 10.20 billion yuan in 2023, +57.64% year over year, gross margin of about 9.64%, down 1.77pct year on year. We believe that processing costs per kg have declined mainly due to increased competition in the industry for pastes such as Perc. (2) In 2023, the company's PV silver paste shipments were about 2003.0 tons, +45.76% year-on-year. Along with the expansion of the company's production capacity and high downstream demand, the company's silver paste shipments continued the high growth trend. (3) Electronic paste achieved operating revenue of about 257.19 million yuan in 2023, and the company actively laid out a second growth curve other than photovoltaics.
The share of the N model will increase in 2024, and LECO is expected to drive further improvements in processing costs. (1) In 2024, the company's annual silver paste shipment volume is expected to reach 3000 tons, of which type N is expected to account for 80%. The company effectively migrated the potassium of Perc silver paste to N-type paste, and its market share increased significantly. (2) LECO technology significantly reduced the contact resistance between solar cell electrodes and silicon substrates. LECO was quickly introduced after 2023Q3. LECO technology needed to replace the traditional front silver paste with special silver paste, LECO sintered silver paste for polytopCon batteries, and P+ type Poly contact silver paste series products to drive an improvement in processing costs per kg.
Self-supply of silver powder is expected to improve the company's profits in the long term. Silver powder is the raw material that accounts for the highest cost of photovoltaic silver paste. Fluctuations in the price of silver powder affect the company's profit to a certain extent. In 2023, the company acquired Jiangsu Lianyin and has now changed its name to Jiangsu Juyouyin. It is committed to the full localization of electronic grade silver powder for photovoltaic cell silver paste. In the fourth quarter, it has already begun to achieve self-supply of silver powder at the monthly level, and production capacity continues to rise, and is expected to gradually increase in 2024. While increasing profits from self-production of silver powder, it can guarantee the customization and stable supply of main raw materials, which is of great strategic significance to the company's scale expansion. After silver powder is manufactured, it is expected that the processing costs of silver powder will be converted into the company's profit.
Profit forecast: Silver paste shipments continue to grow at a high rate, and LECO drives profit growth. We expect the company's revenue for 2024-2026 to be 143.2/171.9/ 206.2 yuan, and the net profit to mother for 2024-2026 will be 734/ 9.14/ 1,049 million yuan, respectively, and the corresponding PE will be 13/ 10/9 times, respectively.
The 2024E EPS was given a 15 times PE valuation, corresponding to the target price of 66.48 yuan, maintaining the “buy” rating.
Risk warning: downstream PV demand falls short of expectations, profit forecasts and valuation judgments fall short of expectations