Key points of investment
Based on the three major businesses of busbars, welding belts, and energy storage, the performance development went hand in hand in 2021-2023. The company achieved operating income of 1,254 billion yuan, 1,636 billion yuan, and 2,848 billion yuan, respectively, up 32.28%, 30.48%, and 74.03% year-on-year; in 2021-2023, the company achieved net profit of 60 million yuan, 70 million yuan, and 120 million yuan respectively. The traditional bus business grew steadily, energy storage and welding belts, respectively The gradual increase in business revenue is expected to create a new growth point.
2024Q1's revenue was 795 million yuan, up 84.68% year on year, and net profit to mother reached 35 million yuan, up 165.64% year on year. The company's product sales orders increased, and performance grew steadily.
Energy storage: Customized energy storage services create a brand advantage. Driven by carbon peaks and carbon neutrality goals, China has welcomed rapid development of new energy and new energy storage. By the end of December 2023, China had put into operation a total of 86.5 GW of electricity energy storage projects, of which 21.5 GW of new energy storage was added in 2023, three times the new operating scale in 2022. The new energy storage market is developing rapidly, and the cumulative installed capacity is already among the highest in the world. With deep experience in equipment such as high and low voltage busbars, the company applies power transmission, distribution and control related technology to energy storage systems, and is committed to becoming a one-stop energy storage solution. In 2022, the company's energy storage business achieved revenue of 72 million yuan and 351 million yuan, an increase of 386.97% year-on-year in 2023. The energy storage business achieved rapid growth and has become one of the company's main sources of revenue.
Welding belt: N-type cell penetration is accelerated. SMBB welding tape is expected to benefit significantly. The cost of photovoltaic welding belts accounts for about 10% of the non-silicon costs of double glass modules. It is a core auxiliary material for photovoltaic modules. Driven by demand for downstream photovoltaic modules, the penetration rate of N-type batteries and multiple main gates has increased significantly, significantly driving the demand for high-margin welding belt products such as SMBB and 0BB. According to our estimates, the demand for photovoltaic welding belts in 2024-2026 was 28.6, 34.0, and 394,000 tons, respectively, up 36%, 19%, and 16% year-on-year. The company is deeply involved in technology research and development. The product matrix of photovoltaic welding belts is rich, and the competitive advantages of products such as SMBB and low temperature welding belts are outstanding. With the implementation of the company's annual photovoltaic welding belt production capacity of 25,000 tons, the company's large-scale advantage is expected to be further enhanced.
Busbars: Deeply involved in the power distribution equipment business, and continue to develop high-quality busbars as connecting components for voltage distribution devices at all levels in substations. Under the steady increase in social electricity consumption demand, bus demand is expected to continue to grow. According to data from the National Energy Administration, in 2021-2023, China's completed electricity investment amounts were 4916, 5006, and 5275 billion yuan, respectively, up 0.41%, 1.83%, and 5.37%, respectively. Electricity investment continued to grow. The company has been deeply involved in busbars for more than ten years and has developed into a well-known enterprise in the bus segment in the domestic power transmission, distribution and control equipment manufacturing industry. In 2021-2023, the company's high and low voltage bus revenue was 6.18, 7.69, and 1,141 billion yuan respectively, up 32.14%, 24.33% and 48.49% year-on-year. The company continued to consolidate its leading position in technology in the industry and achieved rapid revenue growth.
Profit forecasting and valuation
First coverage, giving a “buy” rating. The company is a leading supplier of busbars, and the continuous development of photovoltaics and energy storage creates a new growth curve. We expect the company's net profit to be 2.2, 3.0, and 40 billion yuan respectively in 2024-2026, corresponding to EPS of 1.42, 1.93, and 2.52 yuan/share, respectively, and the corresponding PE is 17, 12, and 9 times, respectively. We selected Yubang New Materials and Tongling Co., Ltd., the leading suppliers of photovoltaic auxiliary materials. Nanwang Technology, a leading company in the energy storage business, was comparable companies. The average PE of comparable companies in 2024-2026 was 24, 17, and 14 times, respectively. As a leading power distribution equipment company, the company's performance is expected to maintain rapid growth as the photovoltaic and energy storage business continues to expand and business collaboration creates a large-scale advantage, giving the company a “buy” rating.
Risk warning
Global PV installations fell short of expectations; raw material prices continued to rise; capacity release fell short of expectations.