Core views

In the first half of the year, the company's two core businesses of photovoltaic brackets and connectors showed a positive trend, achieving net profit of 0.16 billion yuan to 0.19 billion yuan, an increase of 142% to 187% over the previous year. In terms of photovoltaic brackets, with the commissioning of the US factory, orders have been released one after another. Since April, global shipping prices have continued to rise, which may affect the company's customers' order placement and delivery pace in the short term, but downstream demand is still strong. After the shipping situation improves, customers are expected to speed up order placement and delivery.

In terms of the connector business, the QSFP56/QSFP-DD 200G/400G high-speed connectors and high-speed copper connectors produced by the company have been delivered in batches, which are expected to benefit from the increase in demand for high-end digital communication products brought about by AI.

occurrences

The company released its semi-annual performance forecast for 2024. It is expected to achieve net profit of 0.16 billion yuan to 0.19 billion yuan in the first half of 2024, an increase of 142%-187% over the previous year; net profit without deduction of 0.15 billion yuan to 0.18 billion yuan, an increase of 154% -205% over the previous year.

Brief review

1. The two major businesses developed steadily, leading to a year-on-year high increase in performance.

In the first half of the year, the company's two main businesses of photovoltaic brackets and connectors achieved good development, which led to rapid growth in performance. In terms of photovoltaic brackets, with the commissioning of US factories, orders were released one after another, and efficiency increased year on year; in terms of connectors, with the development of domestic artificial intelligence, internet, big data and other industries, demand for servers and data centers continued to increase, and the company's connector business orders increased year on year, driving revenue growth.

The company is expected to achieve net profit of 0.16 billion yuan to 0.19 billion yuan in the first half of 2024, an increase of 142%-187% over the previous year; net profit without deduction of 0.15 billion yuan to 0.18 billion yuan, an increase of 154%-205% over the previous year. In the second quarter of 2024, the company is expected to achieve net profit of 0.073 billion yuan to 0.103 billion yuan in a single quarter, an increase of 45% to 104% over the previous year.

2. US factories are gradually starting up, and downstream demand for photovoltaic stents is strong.

The company's PV bracket business is mainly aimed at overseas customers, covering the world's leading PV tracking bracket manufacturers such as Next Tracker and GCS. In September 2022 and February 2023, the company's subsidiary Taihua New Energy (Thailand) set up 3 subsidiaries in the US, which is beneficial for the company to further enhance its overall competitiveness. According to the company's investor relations activity record announcement in May, production capacity in the US factory is in a climbing phase, and production lines will continue to increase in the second and third quarters according to customer demand.

Since April, global shipping prices have continued to rise, which may affect the company's customers' order placement and delivery pace in the short term, while downstream demand is still strong. After the shipping situation improves, customers are expected to speed up order placement and delivery, contributing more incremental performance to the company. According to data from the US Energy Information Administration (EIA) (May 2024, including statistics greater than or equal to 1 MW), the US added 5.9 GW of PV installed capacity in the first quarter of 2024, an increase of 150% over the previous year. It is estimated that 37 GW of PV installed capacity will be added throughout 2024, an increase of about 90% over the previous year.

3. The connector business is expected to benefit from increased demand for high-end digital communication products, etc.

The company is a leading domestic supplier of communication connectors. External IO ports SFP and RJ45 can be used in servers, switches and other devices. The QSFP56/QSFP-DD 200G/400G high-speed connectors and high-speed copper connectors produced by the company have been delivered in batches. The development of AI will drive demand for products such as high-end switches and servers, and the company's communication connector business is expected to benefit from it.

4. Investment advice.

With the release of production capacity at the US production base and the improvement of operating capacity, and the further improvement of the company's photovoltaic business layout, the future development of the company's photovoltaic bracket business is optimistic. The connector business is expected to benefit from increased demand for high-end switches and the like brought about by AI. We expect the company's revenue from 2024 to 2026 to be 7.18 billion yuan, 8.73 billion yuan, 10.01 billion yuan, and net profit to mother of 0.36 billion yuan, 0.49 billion yuan, and 0.59 billion yuan respectively. The corresponding PE is 22x, 16x, and 13x, respectively, maintaining a “buy” rating.

5. Risk warning: Global PV installation and pace fall short of expectations, affecting the company's downstream customer PV tracking bracket demand; changes in the external environment affect the normal operation of the company's US factory; the implementation of US new energy subsidies falls short of expectations and affects the company's downstream customer demand, company product prices, etc.; US factory operating costs exceed expectations; changes in raw material prices and exchange rate changes affect beyond expectations; the impact of increased competition in the PV stent business, declining company share and profitability; the downstream consumer electronics and communications industry demand for the connector business falls, etc. The company connects to business development; financial pressure is high, which affects business development; there are many individual shareholders, risk of reducing holdings, etc.