Silicon wafer faucets have been fresh for a long time and are actively expanding based on technical advantages. The company was founded in 1958 and entered the photovoltaic industry in 1981. It is one of the earliest domestic companies to produce monocrystalline silicon for solar power generation. Currently, its main business covers photovoltaics and semiconductor materials. In 2020, the company completed mixed ownership reform, and TCL Technology became an indirect controlling shareholder. According to the 23 annual report, by the end of 2023, the company's crystal production capacity reached 183 GW, and the photovoltaic materials business segment further expanded its relative competitiveness and consolidated its market position.

N-type silicon wafers lead the market share, and performance is growing steadily. In 2023, the company shipped about 114 GW of photovoltaic material products, a year-on-year increase of 68%, and the overall market share of silicon wafers was 23.4%. Among them, the large export market accounts for 60%, the overseas silicon wafer export market accounts for 65%, and the N-type market share is 36.4%, maintaining the first place in the export market. In 2024, the company will continue to strengthen N-type Total Solution capabilities and increase the share and market share of large-size, N-type products.

Technology and processes remain advanced, and unit costs are expected to decrease. According to the annual report for '23, by the end of '23, the average labor productivity rate of crystals was 25 MW/person/year, 71% ahead of the industry's second-best, and the average labor productivity rate of chips was 27 MW/person/year, which was 98% ahead of the industry's suboptimal; N-type products achieved a single monthly leading industry suboptimal of about 11.6%, and the number of chips produced per kilogram was about 1.9. Affected by different investment methods, against the backdrop of high unit depreciation of about 0.01 yuan/W, by the end of '23, the company's total cost was leading the industry by about 0.03 yuan/W. According to the “TCL Central 2023 and 2024 First Quarter Results Briefing”, in 24Q2, the company's production cost per kilogram of monocrystals is expected to drop by nearly 20% compared to Q1 or the end of '23.

Initiate global strategic cooperation and actively explore advanced downstream technology. In terms of silicon wafers: The company carefully but firmly promotes a global strategy, and actively evaluates and explores industrial layout projects in key countries or regions around the world (such as the United States, Europe, the Middle East, etc.). Judging from the current progress, the project conditions are still being optimized and observed. In terms of batteries and modules: The company is actively promoting Maxeon's capital structure improvement, organizational transformation, and operational improvement, giving full play to its unique barrier market advantages and technological innovation capabilities in the US, improving its manufacturing shortcomings compared to Chinese companies through manufacturing method upgrades, and enhancing the competitive advantage of the company's global layout through mutual promotion and collaborative empowerment of production and channels around the world.

Profit forecast and rating: We expect the company's net profit to be 17.14, 26.63, and 3.307 billion yuan respectively for 24-26, up -49.8%, 55.3%, and 24.2% year-on-year. The company has the largest silicon wafer market share in the world, and at the same time extends to the downstream sector. Referring to the 24-year valuation level of comparable companies, we gave the company a 24-year PE valuation of 30-32 times, with a corresponding reasonable value range of 12.72-13.57 yuan, giving it a “superior to the market” rating.

Risk warning: Competition intensifies; industry demand declines; production capacity investment falls short of expectations; overseas expansion falls short of expectations.