The company announced 2023 and 2024Q1 results. In '23, the company achieved operating revenue of 81.56 billion yuan, an increase of 11.7% over the previous year, and achieved net profit of 7.04 billion yuan, an increase of 27.2% over the previous year.

In 23Q4, the company achieved operating income of 21.6 billion yuan, a year-on-year decrease of 8.8%; realized net profit of 275 million yuan, a year-on-year decrease of 87.8%. In 24Q1, the company achieved operating income of 15.97 billion yuan, a year-on-year decrease of 22%; realized net profit to mother - 483 million yuan, a year-on-year decrease of 119 percent. 24Q1 results fell short of expectations.

Component shipments have maintained high growth, leading profitability in overseas markets. In '23, the company's component shipments were 53.1 GW, an increase of 39% over the previous year, with overseas shipments accounting for about 48%. In '23, the gross margin of the component business was +3.97 pct year on year to 18.28%. Thanks to the gross margin of the American region +19.75 pct year on year to 36.56% year on year, operating income reached 13.572 billion yuan, an increase of 36.5% year on year. In 24Q1, the company shipped about 16 GW of modules, an increase of 37% over the previous year, and remained flat from month to month. Among them, N-type shipments accounted for about 47%. Affected by the decline in module prices, the company's 24Q1 profit level fell short of expectations. The main reason was the sharp drop in module prices, and gross margin fell 14.05 pct to 5.06% year on year. Looking ahead to 2024, we expect the company's annual shipments to increase 35% + year over year, and the share of N-type shipments will continue to increase.

The newly built production capacity was successfully put into operation, and the advantages of industrial chain integration continued to be consolidated. By the end of '23, the company's module production capacity was 95 GW, and the production capacity of silicon wafers and batteries was about 90% of the module production capacity, including 57 GW of N-type batteries. On the domestic side, projects such as Baotou 20GW crystal drawing and slicing, Ningjin 10GW slicing, Ningjin 6GW battery, and Yangzhou 20GW battery were successfully put into operation.

New construction projects such as 30GW crystal and silicon wafers, 30GW batteries, and 10GW modules in the Ordos High-tech Zone are progressing according to plan. Overseas, Vietnam's 2.5GW pultrating and slicing project was successfully put into operation, Vietnam's 5GW TopCon battery and US 2GW module production capacity progressed according to plan, and US module production capacity was subsequently or expanded to 3.5GW+. The company expects production capacity of silicon wafers, batteries and modules to exceed 100GW by the end of 2024.

Profit forecast and investment advice: Considering the sharp drop in component prices and high costs during the period when the company's production capacity is climbing, we expect the company's net profit to be 32.46 (-73%)/46.55 (-70%)/6.760 billion yuan in 2024-2026, respectively. As a leading N-type integrated production capacity leader, the company will continue to increase its business capacity with the smooth release of production capacity at home and abroad. We gave the company 20 times PE in 2024 (originally 18 times PE in 2023), and the target price was reduced by 62.1% to 19.60 yuan from 51.66 yuan, maintaining the “superior to the market” rating.

Risk warning: Production capacity falls short of expectations, increased industry competition, fluctuating raw material prices, etc.