Q1 Short-term business pressure

According to the company's announcement, in the first quarter of '24, the company's revenue was 5.47 billion yuan, and net profit was 33 million yuan. Factors such as a sharp drop in silicon prices and the company's production capacity still climbing, put pressure on the company's operations in the short term. Considering the oversupply of silicon, the price of silicon material has dropped sharply in 23. We expect the price of silicon to remain low in 24-26, keeping the company's EPS at 0.09/0.12/0.13 in 24/25/26, which is 15.26 times the company's PE in 24 years. Considering the continuous release of the company's granular silicon production capacity, the quality of silicon material has also improved, and the company has a cost control advantage, giving the company 18x PE in 24 years, corresponding to a target price of HK$1.75 (RMB: HKD=1: 1.08), maintaining a “buy” rating.

Reduced silicon prices and rising new production capacity are dragging down profits

According to the company's announcement, the price of silicon material and silicon wafer fell sharply in the first quarter of 2024. The company shipped 65,000 tons of granular silicon in the first quarter of '24, and the price was 55 yuan/kg including tax. The shipping price dropped sharply compared to last year. Furthermore, the decline in silicon wafer prices has also had a negative impact on the company's profits. In the first quarter of '24, the company's production capacity in Inner Mongong/Hohhot was in a climbing cycle. The cost during the climbing period was relatively higher than production, which in turn raised the company's Q1 costs. Following the subsequent addition of production capacity, production was achieved one after another in 24 years, and we are optimistic that the company's granular silicon production costs will be further reduced.

The company focuses on R&D, and the quality of granular silicon has improved significantly

The company is a leader in the granular silicon route in the industry, actively promoting advanced technology research and development. The R&D expenses in the first quarter of '24 exceeded 400 million yuan, mainly involving various aspects such as clean materials and CCZ. In terms of quality, according to the company's announcement, the turbidity of the company's granular silicon has been fully controlled within 120 NTU. The proportion of the first batch of products with turbidity below 100 NTU reached 75%. During March 2024, the proportion of products with metal impurities less than 0.5 ppbw accounted for more than 90%, and the quality improved markedly.

The perovskite industrialization process is expected to accelerate

In terms of single-junction modules, according to the company's GCL Optoelectronics announcement, the conversion efficiency of the company's single-junction 1m*2m large-size perovskite components has exceeded 19.04%, entering the fast track of industrialization; in terms of laminated modules, the efficiency of GCL Optoelectronics's 279mm*370mm laminated modules reached 26.17%, a record high. In terms of production capacity, GCL Optoelectronics plans to build a 2GW grade perovskite production line in Kunshan, establishing the company's pioneering position in the perovskite commercialization process.

Risk warning: silicon prices fluctuated beyond expectations; downstream demand fell short of expectations, etc.