Brief performance review

On August 29, 2024, the company released its 2024 semi-annual report. 24H1 achieved operating income of 2.646 billion yuan, +4.96% year on year; realized net profit of 0.273 billion yuan, or -61.80% year on year; of these, Q2 achieved revenue of 1.226 billion yuan, -2.82% year on year; realized net profit to mother 0.0061 million yuan, or -83.91% year on year, which is in line with expectations.

Management analysis

Leveraging the advantages of closed-loop technology research and development, new product iteration helped the company move through the cycle: the company's four major businesses progressed steadily around the integration of slicing processes in the first half of the year. In terms of photovoltaic cutting equipment, early domestic orders were accepted one after another, and overseas orders continued to land in the first half of the year, achieving revenue of 1.349 billion yuan, +66.96%. By the end of June, the company's photovoltaic cutting equipment products had orders of 1.293 billion yuan; in terms of photovoltaic cutting consumables business, diamond wire was shipped about 29 million kilometers in the first half of the year. Among them, diamond wire was shipped about 29 million kilometers in the first half of the year. Shipments were about 6 million kilometers, and the proportion of tungsten wire increased rapidly; in terms of silicon wafer cutting and processing services, the company effectively shipped about 19 GW in the first half of the year. In the industrial chain price decline cycle, the silicon wafer cutting processing service business model continued to be recognized by the industry, and the market penetration rate increased steadily; in terms of innovative business, the company continued to break through overseas orders in the first half of the year, and orders for innovative business equipment products were 0.114 billion yuan, an increase of 14% over the end of 2023.

The four major businesses have shown growth resilience, and product competitiveness has been steadily improving: in terms of photovoltaic cutting equipment, the company is deeply focusing on R&D and innovation, and is recognized by global customers, and is expected to continue to stabilize its leading position; in terms of cutting consumables, the company led the industry to launch 28/30um carbon wire and 21um linear tungsten wire. It is expected that the share of tungsten wire shipments will continue to increase in the second half of the year, accelerating the refinement and iteration of the industry; in terms of slicing foundry, the closed loop advantage of technology promoted the cutting company's deepening process and achieving cost reduction and efficiency in the first half of the year. The slicing production capacity exceeds 60 GW, and there is huge room for subsequent business expansion; in terms of innovative business, the company broadened product categories in the four major industries of semiconductors, silicon carbide, sapphire, and magnetic materials, achieved overseas sales, silicon carbide slicers formed batch orders, new sapphire chamfering machines formed orders, and product competitiveness continued to improve.

Profit Forecasts, Valuations, and Ratings

According to the company's current orders and latest business developments, the company's profit for 2024-2026 was lowered to 4.22 (-56%) /4.76 (-61%) /7.31 (-54%) billion yuan, corresponding EPS was 0.77/0.87/1.34 yuan, and the current stock price corresponding to PE was 13.9/12.3/8.0 times, respectively, maintaining the “buy” rating.

Risk warning

Technological progress falls short of expectations; there is a risk that silicon wafer prices will fall too fast.