Description of the event
In Q1 2024, the company achieved revenue of 1,438 billion yuan, a year-on-year increase of 0.8%; realized a loss of 6.35 million yuan in net profit, a year-on-year decrease of 151.04%; after deducting a loss of 9.26 million yuan in non-attributable net profit, a year-on-year decrease of 419%.
Incident comments
Q1 Profits declined in the off-season. The company's revenue in Q1 increased by 0.8%, which is expected to decline mainly due to the fact that the first quarter was an off-season for the industry and relatively weak demand; Q1 achieved a gross profit margin of 8.2%, down 1.7 pcts from the previous year, which is mainly due to the impact of falling off-season prices and falling production and sales rates. The rate for the period was 8.2%, a year-on-year decrease of 0.1 pct. Among them, sales, management, finance, and R&D rate changes were -0.2, 0.1, -0.3, and 0.2 pcts, respectively. Furthermore, credit impairment gains increased by 920,000 year over year, asset impairment losses decreased by 3.43 million year over year, and other income decreased by 1.83 million year over year. In the end, net interest rate to mother was -0.4%, down 1.3 pcts year on year; non-net interest rate deducted -0.6%, down 0.8 pct year on year.
The integration of photovoltaic glass and the acceleration of new construction. As of 2023, the company's production capacity of photovoltaic glass raw sheets was 5270 tons/day, an increase of about 13% over the previous year. Among the projects currently under construction, the main project of the Yixing New Energy Project has been completed and put into operation in 2023, and new construction projects such as Luoyang New Energy and Northern Glass are continuing to advance according to the planned schedule. The company's photovoltaic rolled glass production is expected to continue to grow at a high rate in the next few years, and as the scale expands, the unit cost is expected to drop rapidly.
Relying on controlling shareholders, the technical advantage is obvious. The actual controller of the company, China Building Materials Group, is an enterprise directly under the State Council's State-owned Assets Administration Commission, the largest comprehensive building materials industry group in China, and one of the world's top 500 enterprises. Relying on the industrial platform support and scientific and technological innovation support of China Building Materials Group and Kaisheng Technology Group, the company focuses on the main industry of new energy materials and continues to expand application areas.
The total R&D investment in 2023 was 262 million yuan, and the total R&D investment accounted for 3.97% of revenue. 72 technological innovation projects are carried out every year; 89 new patents are applied for each year, including 48 invention patents; 74 new authorized patents are added, including 32 invention patents.
The consolidation of thin-film battery assets has begun to advance. The company previously managed 55% of Chengdu China Building Materials Optoelectronic Materials Co., Ltd., 45% of Ruichang China Building Materials Optoelectronic Materials Co., Ltd., and 60% of Kaisheng Photovoltaic held by Kaisheng Technology Group. In the future, the company will acquire shares in the target company in due course according to its strategic layout and business development needs to further expand the company's business scale and market competitiveness. Considering Kaisheng Technology Group's production capacity planning and the background of central enterprises, it is expected to become the domestic leader in thin-film batteries in the future.
Investment suggestions: The Group's “3+1” strategy continues to advance, and the company will focus on developing related business in the future as a new energy materials platform.
The estimated net profit for 2024 is approximately $510 million, 6 times PE for Hong Kong stocks and 16 times PE for A-shares, with a buying rating.
Risk warning
1. The progress of PV asset integration is low and expectations are low;
2. The production capacity of photovoltaic glass exceeded expectations.