Key points of investment

Based on the vertical integration of photovoltaics, revenue has maintained steady growth. The company was founded in 2005, mainly in the cell business, and began vertical photovoltaic production in 2012. The company is making steady progress, building an “integrated two-wing” business system, and gradually expanding businesses such as energy storage and photovoltaic equipment. The company's revenue in 2023 was $81.56 billion, up 11.7%; net profit to mother was $7.039 billion, up 27%; net profit after deducting non-return to mother was $7.14 billion, up 28%.

At the end of '23, the net profit per watt fell sharply in Q1 when depreciation was applied lightly. The company sold 53.1 GW of modules in 2023, an increase of 39%. Of these, Q4 components shipped 15.5 GW, an increase of 14%. 2024Q1 module shipments are 15GW+, which is basically flat month-on-month. We expect to confirm receipt of about 13.5-14GW, a sharp decrease from month to month, mainly due to ① Q1 silicon price rise+low component price orders. Most markets lost money, and only North America had a certain profit contribution. ② N-type shipments exceeded 50% but production capacity was climbing, and costs are still high; we expect the company's shipments to increase by 40-50% in 2024, accounting for 65% with TopCon's production capacity.

The 23-year increase in the fee rate affected profits, and there was plenty of cash on hand. The company's expenses also increased by 39.33% to 4.508 billion yuan during the 2023 period, and the fee rate for the period increased by 2.13 percentage points to 5.53%, mainly due to security deposits, increased bid fees, and a decrease in exchange earnings. The net operating cash inflow in 2023 was 12.414 billion yuan, up 51.64% year on year, and the 2024Q1 year-end cash balance was 6.7 billion yuan, which was basically the same from month to month.

Profit forecast and investment rating: Considering the intensification of industry competition and the pressure on profits in the entire industry chain, we lowered the company's profit forecast for 2024-2025 and added a profit forecast for 2026. We expect net profit from 2024-2026 to be 32/47/7.1 billion yuan (the value was 800/9.4 billion yuan), or -54%/46%/51% year-on-year, corresponding to 14/10/6 times the current PE. Considering the company's leading position in the industry, we maintain a “buy” rating.

Risk warning: Policies fall short of expectations, and competition intensifies.