Incidents:
On April 29, 2024, the company released its 2023 annual report and 2024 quarterly report. In 2023, the company achieved operating income of 139.104 billion yuan, a year-on-year decrease of 2.33%, and realized net profit of 13.574 billion yuan, a year-on-year decrease of 47.25%, a net cash flow from operating activities of 30.679 billion yuan, a year-on-year decrease of 29.98%, achieving a gross sales margin of 26.44%, a year-on-year decrease of 11.73 pcts. During the reporting period, due to changes in the supply and demand relationship, the sharp drop in silicon prices affected the company's performance The main reason.
2024Q1 achieved operating income of 19.570 billion yuan, a year-on-year decrease of 41.13%, achieved net profit of 787 million yuan, a year-on-year decrease of 109.15%, achieved net cash flow from operating activities of -1,394 billion yuan, a year-on-year decrease of 162.08%, achieved a gross sales margin of 9.20%, and a year-on-year decrease of 33.95/5.63 pct, respectively. Affected by increased competition in the industry, the profit space of all aspects of crystal silicon was squeezed.
Silicon production capacity was released steadily, and the sharp drop in prices affected profits
In 2023, the company's polysilicon business achieved revenue of 44.799 billion yuan, a year-on-year decrease of 27.57%, a gross profit margin of 53.26%, a year-on-year decrease of 21.87 pcts, and achieved sales volume of 387,200 tons, an increase of 50.79% over the previous year. By the end of 2023, the company's polysilicon production capacity reached 450,000 tons, a significant increase from 260,000 tons at the end of 2022, and another 400,000 tons of production capacity under construction. It is expected to be put into operation within 2024. The sharp drop in silicon prices in 2023 had a big impact on the company's performance. According to Antec statistics, the average price of monocrystalline dense materials dropped from 176,200 yuan/ton at the beginning of the year to 583,000 yuan/ton at the end of the year, a decrease of 66.91%.
The integrated production capacity of battery modules continued to improve, and shipments increased dramatically. In 2023, the company achieved operating income of 69.372 billion yuan, a year-on-year increase of 29.60%, a gross profit margin of 12.77%, a year-on-year increase of 2.58pct, and achieved sales volume of 80.66 GW (including personal use), an increase of 68.11% over the previous year. Shipments have ranked first in the world for seven consecutive years; the sales volume of modules achieved 31.11 GW, an increase of 292.08% year on year. By the end of 2023, the company's battery/module production capacity reached 95GW/75GW respectively. The scale effect was evident, the cost level was optimized, and profits were increased.
Profit Forecasts, Valuations, and Ratings
We expect the company's revenue for 2024-2026 to be 1248.1/1487.8/171.8 billion yuan, respectively, with year-on-year growth rates of -10.3%/19.2%/15.5%, net profit to mother of 41.2/73.2/11.85 billion yuan, year-on-year growth rates of -69.6%/77.6%/61.8%, and EPS of 0.92/1.63/2.63 yuan/share respectively. The company's silicon production capacity continues to expand, leading the industry in technology costs, and its leading position is stable; at the same time, the overall crystal silicon industry chain is affected by increased competition in the industry, and profit margins are compressed; as the polysilicon price drop nears its end, domestic and foreign demand recovers, profits are expected to rebound. Referring to comparable company valuations, we gave the company 28 times PE in 2024, with a target price of 25.65 yuan, maintaining a “gain” rating.
Risk warning: PV installed demand falls short of expectations; industry competition intensifies and raw material prices fluctuate greatly.