Incident: The company released its 2024 semi-annual report. 2024H1 achieved operating income of 16.213 billion yuan, a year-on-year decrease of 53.54%, and realized net profit to mother of 3.064 billion yuan, a year-on-year decrease of 167.53%; 2024Q2 achieved operating income of 6.281 billion yuan, a year-on-year decrease of 63.65%, and realized net profit to mother of 2.184 billion yuan, a year-on-year decrease of 195.64%.

Silicon wafer shipments remain the highest in the industry, and the industry has entered a state of irrational price competition, putting pressure on profits. 2024H1's photovoltaic monocrystalline production capacity increased to 190 GW, and the production capacity of high-efficiency tile modules reached 22 GW, and the PV material product shipment was about 62 GW (the overall market share of silicon wafers remained the first in the industry), up 18.3% year on year; however, under the influence of industry overcapacity and entering a state of irrational price competition, the silicon wafer sector achieved operating income of 10.432 billion yuan, a year-on-year decrease of 61.31%, gross margin decreased by 34.13 pcts to -9.25% year on year. Revenue was 2.762 billion yuan, a year-on-year decrease of 46.95%, and gross margin decreased 11.30 pcts year-on-year to 0.94%.

Continue to promote technological innovation and process progress, and maintain full cost industry leadership. In the context of irrational competition in the industry, the company focused on technological innovation and process progress. 2024H1's N-type products achieved a single monthly output of about 12.3%, leading the industry's second-best by 1.15 pieces per kilogram, and in the context of high unit depreciation (affected by different investment methods), the company's total cost leading industry sub-advantage of about 0.033 yuan/W. Furthermore, the company continues to promote the upgrading of Industry 4.0 manufacturing methods, and by 2024H1, the photovoltaic materials sector has achieved flexible manufacturing capacity for more than 1,600 customized products.

Prudent but firm in promoting a global strategy, focusing on the Middle East and North American markets. (1) The company has reached cooperation with RELC and Vision Industries, a wholly-owned subsidiary of the Saudi Arabian Public Investment Fund (PTF), to jointly promote the establishment of the largest overseas crystal chip factory (project annual production capacity of 20 GW, total investment of about 2.08 billion US dollars), and work together to build the first photovoltaic industry chain with leading global technological advantages in the Middle East to support the company's local manufacturing on a global scale.

(2) Although Maxeon is facing operational difficulties such as slow transformation and pressure on profits, its key assets such as patents (IBC battery-module patents, TopCon battery process series patents, etc.) and high-end brands and channels still have differentiated competitiveness on a global scale. During the reporting period, the company plans to control Maxeon through a package of restructuring transactions such as convertible bonds and fixed increases, and enhance the competitive advantage of the company's global layout (especially in North America) through mutual promotion and collaborative empowerment of production and channels around the world.

Maintaining a “buy” rating: The company's profit is under great pressure due to a sharp drop in prices in the industrial chain. We lowered our profit forecast. We expect the company to achieve net profit to mother of 4.249/1.283/1.651 billion yuan in 24-26 (346% down/ 56% reduction/61% reduction). Although the company's profits are being phased under pressure due to factors such as oversupply in the industry, the company's PV silicon wafer supply chain guarantee and non-silicon cost advantages are expected to expand further in the future. At the same time, the global layout and downstream differentiation are expected to open up new growth space and maintain a “buy” rating.

Risk warning: 210 silicon wafer shipments and profits fell short of expectations; semiconductor silicon wafer production capacity and sales fell short of expectations.