Description of the event

The company released its 2023 annual report and 2024 quarterly report. In 2023, the company achieved 1,609 million yuan, +21.49% year over year; realized net profit of 461 million yuan, +12.16% year over year; realized net profit of 431 million yuan without return to mother, +10.25% year over year. 2024Q1 achieved revenue of 450 million yuan, +29.60% year over year; realized net profit of 135 million yuan, +44.48% year over year; realized net profit without deduction of 127 million yuan, +40.86% year on year.

Incident comments

In 2023, along with the gradual confirmation of revenue from new technology orders, the company's performance growth rate increased year-on-year. The rapid growth rate of 2024Q1 performance continued to reflect the steady acceptance of new technology orders. The quarterly performance growth rate of 2023Q1-Q4 was +0.54%, -34.34%, +37.23%, and +62.66%, respectively. As BC laser grooving and TopCon's SE technology were tested, the company's revenue and performance improved markedly at 23H2. The 2023 annual report shows that Longji Green Energy's contract confirmed revenue amount to 60 billion yuan, showing the contribution of new technology equipment inspection to the company's performance growth. The number of orders received by the company continued to increase in 2023. Judging from inventory and contract liabilities, the company's inventory at the end of 2023 was 1,918 billion yuan, +123.5% year over year; contract debt was 1.96 billion yuan, +170.3% year over year, indicating that the company received new orders and orders received rapidly. Among them, the book balance of shipped products accounts for a high proportion of inventory (74.9%), which also shows that the company still has large orders in hand that have not been accepted. Currently, the company's existing SE orders will continue to be accepted. New technology orders from LIF and another leading customer are expected to enter the acceptance period. Along with confirmed revenue from ongoing orders, it is expected to consolidate the company's performance growth this year.

Benefiting from new technology order acceptance gains, the company's profitability continued to recover. In 2023, the company's gross margin was 48.38%, and the net margin was 28.66%, +1.29pct and -2.39pct year-on-year, respectively. The company's gross margin performance may improve in 2023 due to the acceptance of new technology orders. At the same time, due to factors such as the rapid increase in R&D expenses, the company's cost rate increased during the period, +7.03pct. However, benefiting from the software tax rebate (78.69 million) increase, the company's net interest rate ultimately declined slightly in 2023. 24Q1's gross profit margin and net margin increased further to 48.65% and 29.98%. With the acceptance of new technology orders, the company's profitability is expected to improve further in the future.

Laser technology reserves are abundant, and it continues to build a moat for core technology. Currently, production capacity such as TopCon continues to be released, premiums are weakening, cost reduction and efficiency technology is being introduced or further accelerated, and the acceptance of the new process by downstream battery manufacturers may increase markedly. The company has deployed a number of laser processes to reduce costs and increase efficiency, and its leading position is stable. In 2023, laser technologies such as TopCon, IBC, HJT, and perovskite all covered new laser technology and fulfilled orders; the company used TopCon's laser SE and LIF equipment to achieve mass production orders. The company uses BC's slotting equipment, leading the technology industry, and continues to obtain mass production orders from leading companies. In the HJT battery process, the company's LIA laser repair technology received orders from European customers. In terms of components, the company is developing a new laser welding process, which can simplify the production process, reduce battery damage, and improve welding quality. The company has now delivered mass-produced prototypes, which are currently being verified. In 2024, the company is expected to continue to promote the implementation of TopCon+ laser technology, laser transfer, laser string welding, IGBT laser annealing technology, etc., and continue to consolidate order resilience.

Maintain a “buy” rating. The company is expected to achieve net profit of 650 million and 890 million yuan from 2024-2025, corresponding PE is 19x and 14x.

Risk warning

1. The promotion of the company's new technology products fell short of expectations;

2. The acceptance of the company's new technology orders fell short of expectations.