Key points of investment

New production capacity was released in an orderly manner, and performance achieved rapid growth

In 2023, the company achieved operating income of 35.327 billion yuan, a year-on-year increase of 20.22%; achieved net profit to mother of 1,363 billion yuan, an increase of 45.81%; achieved a gross sales margin of 14.58%, an increase of 3.89pct; and achieved a net sales margin of 3.92%, an increase of 0.67 pct over the previous year. 2023Q4 achieved operating income of 7.310 billion yuan, down 12.59% year on year and 29.78% month on month; realized net profit of 84 million yuan, down 55.26% year on year, down 79.93% month on month; gross profit margin of 13.22%, up 4.73 pct month on month, net profit margin 1.18%, down 1.23 pct month on month. In 2023, upstream production capacity in the photovoltaic industry chain was released centrally, and the global photovoltaic industry as a whole maintained a rapid development trend. The company's overseas battery and module production capacity was effectively released, and performance achieved rapid growth.

Solar cell modules are the main source of revenue. Profitability increased significantly in 2023. The company's solar module business achieved operating income of 28.675 billion yuan, up 18.85% year on year, accounting for 81.17% of total revenue, achieving a gross profit margin of 13.63%; achieving 19.10 GW of solar cell module production, an increase of 33.21% year on year; achieving sales volume 18.99 GW, an increase of 40.85% year on year, and both production and sales achieved rapid growth; in terms of profitability, the company's solar module unit price was 1.51 yuan/W, down year on year 15.62%; gross profit per unit was 0.21 yuan/W, an increase of 129.22% over the previous year. In 2023, due to the increase in the proportion of self-supplied solar cells, the upstream supply situation represented by polysilicon improved markedly, the company's manufacturing costs declined, and the profitability of its main products recovered rapidly.

Active preparation of new domestic projects and further expansion of overseas markets

As of the end of the reporting period, the company's photovoltaic module production capacity was 35 GW per year. Production capacity is mainly distributed in production bases such as Ningbo, Zhejiang, Jintan, Jiangsu, Yiwu, Zhejiang, Chuzhou, Anhui, Malaysia, and Baotou, Inner Mongolia. Furthermore, projects such as the “Zhejiang Ninghai 5GWN Ultra Low Carbon High Efficiency Heterojunction Cell and 10GW High Efficiency Solar Module Project”, the “Jiangsu Jintan 4GW High Efficiency Solar Cell and 6GW High Efficiency Solar Module Project”, and the “Anhui Chuzhou High Efficiency Solar Cell Project” are progressing in an orderly manner. The component achieved sales of 18.99 GW.

Among them, overseas component sales reached 8.84 GW, and component shipments to emerging markets such as Brazil, Hungary, Australia, and Colombia achieved major breakthroughs. The company is in the first tier in the field of heterojunction batteries. Profitability is rapidly recovering, and the scale advantage is remarkable. With the orderly implementation of the company's new production capacity and further development of overseas markets, the company's scale advantage will further grow and continue to maintain its leading position in the industry.

Profit forecasting and valuation

The profit forecast was lowered and the “buy” rating was maintained. The company is a leader in photovoltaic heterojunction batteries. It has significant cost advantages in reducing costs and increasing efficiency, and continues to expand overseas markets. Considering the intensification of competition in the component sector market and the price level remains low, we lowered the company's profit forecast for 2024-2025 and added a profit forecast for 2026. We expect the company's net profit to be 16.33, 22.87, and 2,916 billion yuan respectively, corresponding to EPS of 1.43, 2.01, and 2.56 yuan, respectively, and PE 9, 6, and 5 times, respectively.

Risk warning: downstream demand falls short of expectations; risk of fluctuations in raw materials and fuel power prices; fluctuations in international trade policies