The company's 23Q4 and 24Q1 performance was good, and operating cash flow continued to improve: according to the company's 2023 annual report, the 23Q4 company achieved net profit of 791 million yuan, an increase of 27.9% year-on-year and a decrease of 10.5% month-on-month; 23Q4's gross margin was 23.4%, higher than the annual average of 21.8%. According to the company's report for the first quarter of 2024, 24Q1 achieved net profit to mother of 760 million yuan, a significant increase of 48.6% over the previous year, and realized gross margin of 21.5%, an increase of 3.0 pct over the previous year; the net profit margin to mother reached 13.3%, up 3.7 pcts year on year. The 23Q4 and 24Q1 companies achieved net cash flows from operating activities of 1,988 million yuan and 601 million yuan respectively, which has been positive for three consecutive quarters. We believe this may be due to a sharp increase in the amount of cash received by the company from glass sales and the improvement brought about by 23H2's lack of new production capacity.
PV installed capacity is growing rapidly, the proportion of double glass modules is rising, and demand for photovoltaic glass is guaranteed. According to statistics from the National Energy Administration, from January to January 2024, the total installed capacity of photovoltaic power generation reached 45.74 GW, an increase of 35.89% over the previous year; according to the CPIA “2023-24 PV Industry Development Roadmap” and the relevant forecast of the China Commercial Industry Research Institute, China's PV module production may reach more than 600 GW in 2024; the market share of bifacial modules has increased to 67% in 2023. As downstream applications gradually recognize the power generation benefits of double-sided modules, the market share of bifacial modules may continue to rise in the future. We believe that the photovoltaic industry is still showing strong development momentum, leading to higher demand for photovoltaic glass.
Production capacity expanded in an orderly manner, and large kiln+self-supply of raw materials brought a lasting competitive advantage. According to the company's 2023 annual report, as of December 31, 2023, the company's total production capacity is 20,600 tons. In 2024, the company's Anhui Phase IV project and the Nantong project are expected to be ignited continuously during the year, with a total daily melting capacity of 9,600 tons/day. At the same time, the company also plans to invest in the construction of a photovoltaic cover glass project with an annual output of 1 million tons in Indonesia to meet the demand for photovoltaic glass in different countries and regions. The company has adopted two major strategies on the raw materials side. One is to use large-scale kilns with a daily melting capacity of 1,600 tons to reduce the production cost and energy consumption of photovoltaic glass, and the other is to reduce raw material costs by purchasing quartz sand and using direct natural gas supply. As the recent decline in soda ash prices stabilizes, the company's costs and operating conditions may be more stable for some time to come. We believe that in the fierce competition in the photovoltaic glass industry, Follett's cost advantage is still the first key to future success.
Profit forecast and rating: We expect the company's net profit to be 38.28, 47.20, and 5.321 billion yuan respectively for 24-26, up 38.7%, 23.3%, and 12.7% year-on-year. As a leader in photovoltaic glass, the company's profitability remains industry-leading. Refer to comparable companies that gave the company a PE valuation of 20-22 times in 2024, corresponding to a reasonable value range of 32.60 to 35.86 yuan, giving it a “superior to the market” rating.
Risk warning: Risk of new PV installations falling short of expectations; risk of industry and market competition.