Core views
The company released the 2024 annual report and the 2023 quarterly report. The company's net profit to mother in 2023 was 13.574 billion yuan, and the company's net profit to mother in Q1 2024 was -787 million yuan. The company's silicon production capacity has been steadily implemented, and under technological iteration+scale advantages, the company's costs continue to decline, and quality continues to improve. TopCon battery production capacity has been implemented rapidly, leading the way in product conversion efficiency, yield, and non-silicon costs. Multiple technology routes are being developed in parallel, and the leading position in the industry is stable. The component business is booming and successfully ranked in the top five global shipments in 2023. The company is a leading company in the silicon and battery industries. The integration of components is progressing rapidly and its position in the industry is stable.
occurrences
The company released the 2023 annual report and the 2024 quarterly report. The company's revenue for the full year of 2023 was 139.104 billion yuan, down 2.33% year on year, and net profit to mother was 13.574 billion yuan, down 47.24% year on year; 2024Q1 company revenue in a single quarter was 19.57 billion yuan, down 41.13% year on year, down 29.31% month on month. 2024Q1 company net profit to mother for the single quarter was -787 million yuan, down 109.15% year on year, up 71.16% month on month.
Brief review
Silicon production capacity has been steadily implemented, and under technological iteration+scale advantages, the company's costs continue to decline, and quality continues to improve.
Silicon production capacity has been steadily implemented. By the end of 2023, the company's silicon production capacity reached 450,000 tons/year, and 400,000 tons of projects under construction are expected to be implemented one after another in Q2-Q3 of 2024. The company is currently the largest polysilicon supplier with the largest production capacity. In 2023, the company sold 387,200 tons of silicon, a year-on-year increase of 50.76%, and the corresponding market share was about 30%.
The cost of silicon materials continues to decline. The company's investment cost of 10,000 tons has dropped to 50,000 yuan/ton, various consumption indicators have also continued to decrease, and the company's average production cost has dropped to less than 42,000 yuan/ton in 2023. At the same time, the company has also supported industrial silicon projects in Inner Mongolia and Sichuan, which helps improve supply chain security.
In 2023, due to the rapid release of silicon production capacity, silicon prices fell rapidly. The company's gross margin of silicon fell from 76.96% in 2022 to 57.16% in 2023, but the net profit per ton still exceeded 45,000 yuan/ton, showing strong resilience to risks.
The quality of silicon materials continues to improve. Currently, the company's N-type products account for more than 90% of the monthly output. The 1000 tons/year electronic grade polysilicon products that can be used in the semiconductor industry have successfully passed verification by domestic and foreign customers, and overseas supply has been achieved.
TopCon battery production capacity has been implemented rapidly, leading the way in product conversion efficiency, yield, and non-silicon costs. Multiple technology routes are being developed in parallel, and the leading position in the industry is stable.
The PERC production line fully accounts for depreciation, and is lightweight to welcome the N-type era. By the end of 2023, the company's battery production capacity had reached 90 GW per year, of which TopCon battery production capacity was about 25 GW. Considering that the profitability of PERC batteries has continued to decline since 2023, TopCon batteries have become mainstream in the market. Based on the principle of prudence, the company calculated impairment preparations for PERC battery production capacity — in 2023, the company calculated impairment reserves of 4.73 billion yuan for fixed assets and technical improvement projects;
TopCon battery production continues to expand. In 2024, the company will gradually complete the transformation of about 38 GW PERC production capacity, and will add 16 and 25 GW TopCon battery production capacity at Meishan and Shuangliu bases respectively. It is expected that by the end of the year, the company's TopCon battery production capacity will exceed 100 GW/year;? The share of N-type batteries increased rapidly. In 2023, the company's battery sales volume was 80.66GW (including personal use), an increase of 68.11% over the previous year. Among them, TopCon batteries accounted for about 15%, and Q1 further increased to about 50%.
The company's TopCon battery is leading the industry in multiple indicators. In 2023, the company's TNC battery used new technologies such as high-square barriers and advanced metallization, and the latest mass production conversion efficiency reached 26.26%, and the non-silicon cost dropped to around 0.16 yuan/W; the component business was booming, and the shipment volume successfully ranked among the top five in the world in 2023.
2023 is the first full operating year for the company to lay out the component business. In 2023, the company's component sales volume was 31.11 GW, an increase of 292.08% over the previous year, and the shipment volume entered the top five in the world;
The company's three advanced component manufacturing bases in Yancheng, Jintang and Nantong have been put into operation one after another. Relying on digital, informatization and intelligent production line construction and comprehensive quality management systems, the company's component production and operation efficiency and product quality control capabilities are at the first-line level of the industry;? Overseas markets continue to advance. The company focuses on global brand communication, key market channel improvement, blank market development and core customer maintenance. It has continuously been on the BNEF Tier 1 list, established an industry-leading full-supply chain traceability system from silicon materials to components, completed the signing of key projects such as the first 100MW overseas ground power plant, and officially entered the ranks of important global component suppliers.
Investment advice: The company is a leader in the silicon and battery industries. Component integration is progressing rapidly and its position in the industry is stable. The company's net profit for 2024-2026 is estimated to be 15.17, 54.9, and 7.602 billion yuan, respectively, with year-on-year growth rates of -88.83%, 262.01%, and 38.47%, respectively. Earnings per share are 0.34, 1.22, and 1.69 yuan, respectively. PE corresponding to the closing market value on May 15 is 66.08, 18.25, and 13.18 times, respectively.
Risk warning: 1. Competition in the silicon industry is intensifying. There is a high risk of excess silicon in 2024, causing silicon prices to drop rapidly. Despite the company's significant cost advantage, short-term silicon inventories continue to accumulate, and increased competition may cause losses in the silicon business; 2. There is a risk that net profit per W of batteries and components will decline.
Due to the release of silicon production capacity and the gradual return of terminal demand from high growth, product prices in the main industry chain have continued to decline since 2023, and production capacity of superimposed batteries and modules has expanded rapidly. Currently, profits are all under great pressure, which may affect the company's net profit back to home; 3. There is a risk that demand for photovoltaic terminals will fall short of expectations. We expect the normal growth rate of the photovoltaic industry to be 20-30% in the future, but if industry demand falls short of expectations due to bottlenecks in power grid consumption or other links, the company's sales volume of silicon, battery, and module products may also be affected; 4. Risk of credit rating downgrade. Fitch International maintained the main credit rating of Tongwei Co., Ltd. at BBB- unchanged, and lowered the rating outlook to negative.