The company announced 2023 and 2024Q1 results. In 2023, the company achieved operating income of 113.392 billion yuan, an increase of 33% over the previous year; net profit to mother was 5,531 billion yuan, an increase of 50% over the previous year. Among them, 23Q4 achieved operating income of 32.272 billion yuan, a year-on-year increase of 20% and a month-on-month increase of 2%; net profit to mother was 454 million yuan, a year-on-year decrease of 64% and a decrease of 70% month-on-month. In 24Q1, the company achieved operating income of 18.256 billion yuan, down 14% year on year and 43% month on month; net profit to mother was 516 million yuan, down 71% year on year and up 14% month on month.

Component shipments have continued to increase, and falling prices have put pressure on profits. In '23, the company shipped 65.2 GW of components, up 51% year on year, of which export sales were 54.5GW, up 56% year on year; gross margin was +3.7 pct year on year to 15.54%. In 24Q1, the company shipped 14GW+ components and received 12GW+. The sharp drop in component prices put pressure on the company's component business profit, and 24Q1 gross margin fell to 14.84%. Looking ahead to 24, the company expects to ship 80-90GW of components, an increase of 23% + over the previous year. Looking at the subregion, the US market performed well. In '23, the company's US market revenue reached 10.834 billion yuan, up 99% year on year, and gross margin was +18.2 pct year on year to 34.24%.

Distributed profits remained stable, and the support business contributed new volume. 1) In 23, distributed shipments were 9.6 GW, up 55% year on year; 24Q1 shipments were 1.7 GW, with a profit of about 2 gross per watt; distributed shipments were expected to grow 20% + in 24, and profit per watt remained stable; 2) In 23, the bracket business shipped 9.6 GW, an increase of 118.2% year on year; 24Q1 shipments were 1.8 GW, and profit per watt remained stable; 3) In 23, energy storage shipments were about 2 hours; 24Q1 shipments were about 0.4-0.5 GWh, Shang Shang Not Reversing losses; energy storage shipments are expected to be about 5GW in '24, a year-on-year increase.

TopCon's production capacity continues to expand, and US component production capacity is about to be put into operation. By the end of 2024, the company's silicon wafer/battery/module production capacity was 55/75/95 GW, of which TopCon battery production capacity exceeds 40 GW; the company expects production capacity to reach 60/105/120 GW by the end of 2024.

The company continued to step up R&D efforts. R&D expenses reached 5.53 billion yuan in 23 years, an increase of 19.7% over the previous year. The N-type i-Topcon module laboratory power exceeded 740W, and technology continued to lead the industry. Overseas, the company has an integrated production capacity of 6.5 GW in Southeast Asia and built a 5 GW module production capacity in the US. The company expects the US production capacity to be put into operation in October '24.

Profit forecast and investment advice: Considering that the sharp decline in industrial chain prices affects the company's profit level, we expect the company's net profit to be 42.81 (-50%)/58.73 (-43%)/7.075 billion yuan in 2024-2026, respectively. The company benefited from a diversified business structure and continued to develop new technologies, giving the company 15 times PE in 2024 (originally 14 times PE in 2023). The target price was reduced by 33% from 43.82 yuan to 29.40 yuan, maintaining a “superior to market” rating.

Risks: Production progress falls short of expectations; industry competition intensifies; raw material prices are higher than expected.