Performance summary: The company released its report for the first quarter of 2024. In 2024Q1, the company achieved revenue of 3.64 billion yuan, up 135.4% year on year; net profit to mother of 180 million yuan, up 103.7% year on year; deducted non-net profit of 190 million yuan, up 143.5% year on year; comprehensive gross profit margin of 10.7% and net profit margin of 4.8%.
The share of N-type TopCon silver paste shipments has further increased, driving rapid revenue and profit growth. N-type TopCon batteries have a higher silver consumption per watt than PERC. According to SMM data, 24Q1 TopCon batteries account for more than 60% of production, so demand for photovoltaic silver paste is growing rapidly. As the leader of TopCon battery silver paste, the company continued to lead the industry with 24Q1 silver paste with a year-on-year increase of 96.8%. Of these, TopCon silver paste sales volume was 493.2 tons, accounting for a sharp increase of 86.5%. Currently, TopCon battery silver paste technology is more difficult, and processing costs are higher than PERC silver paste, so the company's silver paste business revenue and profit have increased.
However, the price of silver rose in the first quarter. The sales price of the company's products and the purchase price of silver powder were all priced on the basis of silver point prices. With the gross profit per unit of the product unchanged, the increase in silver prices led to a slight decrease in gross margin as the revenue base increased.
The share of LECO silver paste in TopCon silver paste has increased, and profits are expected to continue to increase from the second quarter. 2023Q4 downstream TopCon batteries began introducing LECO laser sintering technology, which is progressing smoothly. Currently, LECO has basically become the standard for TopCon batteries, requiring silver paste to be optimized and upgraded accordingly. Currently, there are a limited number of suppliers that can provide LECO silver paste solutions, and the company is expected to enjoy industry dividends. LECO silver paste processing costs are higher. As downstream LECO continues to be introduced in the second quarter, the company's share of LECO silver paste increased, and profitability is expected to continue to increase.
The silver nitrate project continues to advance and is expected to be completed and put into operation by the end of the year to ensure the safety and stability of the supply chain. In 2023, the company plans to build production capacity for high-performance electronic materials such as 5,000 tons of silver nitrate and 1,800 tons of metal powder. The purity of silver nitrate products has an important impact on the performance of metal powders. The company's investment in the silver nitrate project can greatly guarantee the safety and stability of the supply chain, reduce raw material costs, improve the competitiveness of the company's products, and thereby improve profitability. The company's silver nitrate project is expected to be completed and put into operation by the end of 2024, at which time its comprehensive strength will be further enhanced.
Profit prediction and investment advice: As a global leader in photovoltaic silver, the company enjoys opportunities to increase quantitative profit under the iterative trend of TopCon batteries, and the self-supply ratio of silver powder gradually increases unit profitability. We expect the compound growth rate of net profit to be 36.29% in the next three years, 20 times PE in 2024, with a target price of 89.6 yuan for the first time, covering a “buy” rating.
Risk warning: Downstream technology development falls short of expectations; risk of rising raw material prices and falling company profits; risk of increased industry competition and falling silver paste processing fees; risk of exchange rate fluctuations.