Description of the event
Longji Green Energy released its 2023 annual report and 2024 quarterly report. In 2023, the company achieved revenue of 129.498 billion yuan, which was basically the same; net profit to mother was 10.751 billion yuan, down 27% year on year; among them, 2023Q4 achieved revenue of 35.398 billion yuan, down 16% year on year, up 20% month on month; net profit to mother - 942 million yuan, down 125% year on year, down 137% month on month; 2024Q1 achieved revenue of 17.66 billion yuan, down 38% year on year, down 50% month on month; net profit to mother - 2.35 billion yuan, down 165% year on year and 149% month on month.
Incident comments
In the battery module business, the company achieved 67.5 GW of module shipments in 2023, an increase of 44% over the previous year, including export sales of 66.4 GW, 1.1 GW for personal use, and 5.9 GW of battery export. The net profit per watt of integrated components in 2023 is relatively good compared to the industry, or is related to the company's confirmed order structure. By market, China, Europe, Asia Pacific, America, Middle East Africa accounted for 57%, 18%, 14%, 7%, and 4% of revenue, respectively, with gross margins of 16.2%, 20.5%, 16.8%, 28.3%, and 16.8%, respectively. At the end of 2023, the company's battery module production capacity reached 80 and 120 GW, respectively. Among them, the battery production capacity included HPBC of 30 GW or more and TopCon of 10 GW or more. The PERC battery production capacity part has been depreciated and eliminated. 2024Q1 shipments to the US market support average prices and profits to a certain extent, and the non-US market is expected to be near break-even.
The silicon wafer business, shipped 125.4 GW in 2023, up nearly 50% year on year. Among them, export sales volume was 53.8 GW, up 27% year on year, 71.6 GW for personal use, and the proportion of personal use increased further. The net profit for a single watt of 2023Q4 silicon wafers is expected to be near break-even.
By the end of 2023, the silicon wafer production capacity reached 170 GW, and the total non-silicon cost of the entire process decreased by 21% compared to 2022. 2024Q1 anticipates a net profit loss per watt of silicon wafers, mainly due to falling prices at the industry level and increasing profit pressure.
On the other hand, based on strict accounting standards, the company experienced asset impairment losses of more than 7 billion dollars in 2023, including preparation for depreciation of 5.2 billion dollars in inventory calculation (preparation for depreciation of about 1.35 billion yuan due to US delays in Hong Kong), 1.6 billion yuan in fixed asset impairment reserves, and the rest for impairment of projects under construction and contract assets. Q4's asset impairment losses alone reached 3.9 billion yuan, affecting profit release on the reporting side; the net investment income for the year was 3.5 billion yuan, mainly from Tongwei's joint venture silicon project. 2024Q1 lost 2.81 billion yuan in asset impairment, and the scale is still quite large. Among them, the inventory plan is preparing 2.65 billion yuan for price reduction; net investment income of 90 million yuan, which declined from month to month. Mainly, the profit of the Tongwei Joint Venture Silicon Project also narrowed.
Looking forward to the future, the company spent the cold winter in the industry with strong cash reserves and obtained excess profits through technological innovation. In terms of silicon wafers, it is expected that around 135GW will be shipped in 2024, and the silicon wafer production capacity will reach 200GW in the next three years. Among them, “Terry” silicon wafer production capacity will account for more than 80%, and mass production is expected to be introduced in 2024Q2. In the battery sector, the company firmly lays out the BC route. It believes that the BC route will become the absolute mainstream of crystalline silicon batteries within the next 5 years. The second-generation HPBC module has higher power than TopCon modules of the same specification, and plans to launch 2024H2. In terms of components, the 2024 shipment target is 90-100GW (including batteries), and production capacity is expected to reach 150GW in the next three years. The US joint venture plant has officially been put into operation, which will help increase the share of US shipments. Furthermore, the company is actively deploying hydrogen energy, and its annual turnover has exceeded 100 million yuan, which is expected to become the company's next growth curve.
We expect the company to achieve net profit of 3.5 billion dollars in 2024, which is about 40 times PE. Maintain a “buy” rating.
Risk warning
1. Deterioration of the competitive landscape;
2. PV installation falls short of expectations.