Recommended logic: 1) Due to the mismatch between supply and demand, cell profits are under pressure. Second- and third-tier manufacturers face financial difficulties. More and more projects are terminated, transferred, and bankrupt, and the industry begins mergers and restructuring. It is expected that the 24Q4 to 25Q1 off-season demand will clear up at an accelerated pace, and the battery sector is expected to take the lead in reaching an inflection point in supply and demand. 2) The company has leading TopCon technology, efficiency and cost. It has mastered edge passivation technology, focused on PolyFinger technology, and laid out cutting-edge technologies such as TBC and perovskite lamination. In the process of rapid technology iteration, it is expected to widen the gap with competitors and maintain a leading edge. 3) The company's share of overseas revenue rapidly increased from 4.7% in '23 to 11.6% in 24Q1.

The company is building a 5GW production capacity in Oman and is expected to be put into operation in 2025, and is expected to enter the highly profitable US market at a lower cost. As the share of overseas revenue continues to rise, with high profits in overseas markets, the company's performance is expected to reverse first.

Limited financing and pressure on profits have accelerated the reshuffle of the industry, and the battery sector is expected to take the lead in clearing the market and ushered in an inflection point in supply and demand. TopCon battery production capacity was released at an accelerated pace from 23 to 24, and TopCon battery profits were under pressure due to mismatches between supply and demand. The rate of introduction of new production capacity is expected to slow significantly in 2025. Currently, second-tier and third-tier manufacturers in the industry are generally facing financial difficulties. More and more projects are being terminated, transferred, and gone bankrupt, and the industry has begun mergers and restructuring. We expect the low demand season from 24Q4 to 25Q1 to accelerate the withdrawal of backward production capacity, and the battery sector is expected to take the lead in reaching an inflection point in supply and demand. Currently, TopCon battery superposition LECO technology can achieve a conversion efficiency of more than 26% and a storage efficiency of more than 25%.

The theoretical efficiency of TopCon batteries is as high as 28.7%. CPIA predicts that TopCon will maintain 0.3 to 0.4 pp efficiency improvement space every year, which is still far from reaching the efficiency ceiling. In the future, TopCon can further improve efficiency and reduce costs through superposition edge passivation technology, double-sided Poly, BC structures, perovskite lamination, 0BB, etc. Future technology iterations require the cooperation of equipment, materials, and processes, and the learning curve will be steeper, and technology-leading companies can transform efficiency, cost, and yield advantages into profit advantages.

Enjoy TopCon's technical dividends to overtake curves, and technological iteration leads the development of the industry. The original main business of Junda Co., Ltd. was the R&D, production and sales of automotive plastic interior and exterior parts. Since 2021, it has successfully transformed its photovoltaic cell manufacturing business by acquiring Jietai Technology. Jietai Technology chose the development direction of N-type batteries in 2022, and quickly built production lines, expanded production capacity, and improved production efficiency, taking the lead in large-scale mass production of N-type batteries, leading the industry in scale and technology. 2024H1, the company shipped 19.21 GW of battery products, ranking second in the world, of which the N type shipped 16.43 GW. The company enjoyed TopCon technology dividends, and its performance grew by leaps and bounds.

Jietai Technology is a leader in battery technology and has mastered edge passivation technology. It focuses on PolyFinger technology and lays out cutting-edge technologies such as TBC and perovskite lamination. Once cost-effective, it will take the lead in mass production, widen the gap with competitors in the rapid iteration of technology, and continue to maintain its leading edge.

Overseas markets contributed to excess profits, and performance is expected to be the first to reverse. Overseas countries support the development of the local manufacturing industry through additional tariffs and subsidy policies, but the progress of planning and construction of cell production capacity lags far behind that of components. There is a large gap in future battery supply, providing room for premium prices. In terms of products going overseas, the company implemented the “JTInside” co-branding strategy, using the brand to empower customers, and the share of overseas revenue rapidly increased from 4.7% in '23 to 11.6% in 24Q1. In terms of overseas production capacity, the company is building a 5GW production capacity in Oman, which is expected to be put into operation in 2025, and is expected to enter the highly profitable US market at a lower cost. The share of overseas revenue will continue to rise in the future, and with the high profitability of overseas markets, the company's performance is expected to reverse first.

Profit forecasting and investment advice. The compound net profit growth rate for 24-26 is expected to reach 25.7%. Based on the company's leading edge in technology, efficiency, and cost in TopCon, it will consolidate its leading position in rapid technological iterations in the future. At the same time, the company is taking the lead in setting up overseas markets, and the share of overseas revenue will continue to increase. With its high profit performance in overseas markets, the company is expected to take the lead in reversing. Referring to comparable companies in the same industry, a valuation of 15 times the year 2025 was given, corresponding to a target price of 53.25 yuan, which covered the “buy” rating for the first time.

Risk warning: Risk of overseas production capacity construction and market expansion falling short of expectations; risk of changes in overseas trade policies and exchange rate fluctuations; risk of increased competition in overseas markets and lower profits than expected; risk of PERC production capacity shutdown falling short of expectations.